Written By: Alli Masoero, CFP® – Zenith Lead Financial Planner
Not Rich, Yet: A blog talking about finance in a way you’ll actually understand.
As generations turn, instead of waiting to buy a house when you start a family, we see more individuals buying houses as an investment at a young age. When you hear your friends doing it, you can’t help but question whether or not it’s a good idea for you (aka you get FOMO).
I am not here to compare the cost of renting versus buying, this is a deeper conversation. We are here to discuss the emotional side of this decision. If all factors aren’t considered, consequences may arise.
Questions to ask yourself:
→ What prompted you to think about purchasing a home?
→ Do you plan to stay in the area? Is there a possibility you would relocate?
→ What is your job security?
→ Do you plan on raising your children in the house?
→ Do you want to rent it out? Do you mind being a landlord?
→ Do you want a creative fixer-upper or a hands-off new build?
Many people that have jumped into home ownership with no financial difficulties but find themselves in a bind due to other factors. Below are scenarios that help illustrate how home buying may not be ideal for everyone:
Case #1: Sarah thought it was a great idea to buy a house to “save money on rent” but lost her job one year after purchasing it. She secured a new job, but she has to move to a new state. She does not want to be a landlord, so she sells it at a loss.
Case #2: Dave saw his two friends, well versed in real estate, profit on an investment property. Dave purchased a house with the intention of mimicking his friend’s success. As he became a landlord, the demands of his tenants were giving him a headache. He hired a property manager and now is barely making a profit.
Case #3: Kaila purchased a nice townhome in a great neighborhood. Soon after, she met her fiancé Charles. After talking through their goals, the 2 bedroom house was too small for them and their future family. Kaila had to offload the property much sooner than she expected.
Case #4: Zeke was very excited to purchase his first home. His parents have always encouraged him to invest in property. He watches a lot of home improvement shows and was excited to buy a fixer-upper. After purchasing it, he realized his skills were not as advanced as he thought. He hired people to assist, and is now cash flow negative on the house.
The examples show the consequences of not considering the less-discussed qualitative factors before purchasing a home. We hope you take the time to speak with your advisor before purchasing. We want to help as you find your dream home – but just when it makes sense!
Invest safely out there!
All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.