Affordability, rate of return and the costs of repairs and upkeep — those are the factors potential buyers should keep in mind when searching for their first ever home, whether they plan to flip it or just move straight in.
The most important thing for first-time homeowners to know, said Realtor Colin Krieger with RE/MAX, is they don’t need the long-spouted “20 percent down” to purchase a home.
“For most of the people in our area, they’re actually putting less than 5 percent on a house, and quite a few don’t put any money down and still get great interest rates for that,” he said.
That doesn’t mean they shouldn’t take affordability into consideration. Realtor Doris Hardy of Century 21 Doris Hardy and Associates cautioned first-time homeowners to look at all aspects of the home’s upkeep, as well as the actual sale price.
“They don’t think of window treatments, blinds or anything else,” Hardy said. “They look at a house and they have no idea of what the cost of annual maintenance is. That’s very important to educate them on that because that determines — when they sell their house — will they be on the short end of the stick and not break even, or, based on what they have purchased and put into it, will they break even, or will they actually realize a profit?”
While “flipping homes” has been a trend for years, both Krieger and Hardy said homeowners — especially those inexperienced in ownership and major renovation projects — should be careful about how they invest in a home, especially since the COVID-19 pandemic has caused major delays in supply lines and huge increases in the cost of materials.
Krieger said it’s becoming increasingly popular to purchase “move-in ready homes,” preferably with roofs and HVAC systems that are fewer than 10 years old.
But whether you’re moving in or flipping, Hardy recommended coming up with a list of “needs and non-negotiable wants” and a list of “wants.” That list is where you have to be realistic about things like pools and outdoor kitchens.
“Those things are really fun and nice to have, but you have to look at your rate of return,” she said. “(For pools) he who installs it takes the hit.”
The pandemic has also brought to light the disadvantage of recent trends in home design. For years, homeowners had increasingly gone for open, spacious floor plans, but now the realities of working from home have made many people realize they want more privacy than those open floor plans often allow, Hardy said.
For investments and renovations that typically pay off, Hardy recommended making sure the materials used match the value of the home and aren’t too updated or “high-end” for the rest of the house.
“Kitchens you get a quick rate of return, but the materials have to be appropriate for the house,” she said.
Investments where it’s hard to go wrong are “mother-in-law” suites, power-and-Wi-Fi-equipped shops and outdoor living like investments in landscaping.
Neither Krieger nor Hardy recommend first-time homeowners build their own home.
“It’s probably the toughest time in the last 30 years to build a house as a first-time home buyer,” Krieger said. “In the last 18 months, the price of wood has nearly tripled … so the average new construction in our market […] is approaching $300,000 which is quite a bit above what most first-time home buyers want to spend.”
He recommended those looking to buy begin shopping early, so they’re familiar with the market by the time they’re ready to make a down payment. Hardy added that home owners should get good counsel from a good Realtor. Both of these things will build buyers’ confidence.
“Almost all of the houses in our entry-level price range are selling immediately,” Krieger said, “and if you wait to get qualified until the day the house comes on the market and you haven’t seen any other houses and you’re not confident, then you’re probably going to miss out on a few houses and have your heart broken.”