It may not have all of the glamour. It may not be perfectly updated. And it may not be in the dream location. But a starter home is, well, a great place for many home buyers to start. By making the move into ownership from a rental, there is a lot to consider—from market availability and appreciation trends to what color you can paint the walls without a landlord’s prior approval.
What is realistic for the market?
According to a 2019 report from Realtor.com, 45% of mortgages assumed this year will be by Millennials. With younger buyers on the hunt for their first home, they will also have younger savings portfolios—and likely eager to keep the budget down. However, here in Nebraska and around the country, low prices tend to represent high competition from other would-be residents, people looking to flip houses and property management companies.
What compromises are you willing to make?
When creating a wish-list for a starter home, divide the items into “must-haves” and “could-haves.” By its very definition, you will likely move on from your starter home—so prepare to be fine if it doesn’t check all of the items on your list for a dream home. The purpose here is to also get serious about what you are unwilling to compromise, such as your top budget, the location or number of bedrooms.
Do you want move-in ready?
Although starter homes are often good chances to put your own touch (and experience the appreciation benefits) of renovations, there are some great renovated or completely new options that fit many buyers’ budgets for their starter home—especially if you are willing to look on the farther edges of town.
How long do you plan to stay?
In order to recoup the investment in the face of other expenses (such as closing costs and needed home maintenance), the general rule of thumb is that you should stay at one address for at least five years. Of course, it could be much shorter or longer than that depending on how quickly houses in the region continue to appreciate—but if you anticipate you will outgrow a 2-bedroom, 1-bath home by 2021, you may want to consider looking larger now.