According to a recent article in Bloomberg, starter homes are making a comeback.
These properties, for adults not yet ready to start a family but wanting to own instead of rent, tend to be on the smaller side and cost less than the market average. However, the changing real estate market pushed them aside for greater focus on “dream” or “forever” homes, but as the economy’s improving and interest rates remain low for the time being, purchasing one starts to seem practical for a certain sect of Millennial buyers.
Reflecting the greater demand, companies building these homes, usually falling in the $200,000 to $400,000 range, experienced increased revenue for the third quarter in 2015. So, if you’re thinking about a starter home, what should you be mindful of?
1. Finances
A starter home begins to make sense when you meet the following:
- You expect to outgrow the property in five years.
- You could see yourself selling it or renting it out.
- You’re able to contribute more toward the mortgage to pay off a bigger part of the principal.
Otherwise, if you’re scraping by on premiums, you could take a financial hit in purchasing this property or end up long term with something less than ideal.
2. Is It Affordable?
A typical starter home, usually a townhouse or a condo, needs to be on the lower end of what you can afford. Part of this approach involves strategizing your monthly payments; you should have enough to contribute more or make extra payments early on.
Be aware that, if you’re vying for that dream home in a decade’s time, you should have most of the starter paid off and enough to make a sizeable down payment on your next property.
3. Will You Be Making Repairs?
Purchasing a starter involves some compromises. Aside from the size and location, this could be how much work the home needs.
Be aware that, because you plan to sell this home in a few years, not making these improvements could lower the home’s resale value or could deter potential buyers. So, make sure the property only requires a minimal amount of improvements, and set aside funds to complete them in a timely manner.
Whether you’re looking for a smaller townhouse as a starter or a larger “forever” home, By Carrier’s communities present an array of options for buyers. Contact us today to learn more about our custom homes.