Monday, March 24, 2008

How to Make Sure this is your Dream Home: 7 Practical Tips

As promised I’ll be writing a bit more on real estate. In this post I’ll discuss some practical tips on how to properly research a property before buying it. Since I’m writing for you, my readers, and I usually focus more on investments, I’ll be very happy to hear your thoughts and your level of interest in the subject in it, if any. As always if you would like me to focus more on one of the other topics I write about please let me know at:
dorian.wales@gmail.com

I consider myself a diligent person. Before I buy I usually read consumer reviews, compare prices, ask for a trial periods, consult with experts, consider recommendations and more.

Surprisingly, I wasn’t as diligent when I bought my apartment. I did my research, and very thoroughly so, but I didn’t get a trial period (yes, there is a way) or a house inspection, for example.

Buying a home, as we always say, is probably going to be a major financial deal for most of us. Therefore, we must demand it from ourselves be as diligent as is humanely possible.

How can make sure the property we’re about to buy is the home of our dreams (for the next decade, at least):

#1 Rent before you buy

It might sound odd at first but this tip has a lot of sense. It doesn’t have to be the exact same property but it would be more helpful if it is. When buying a property you have to get a very intimate knowledge of its surroundings starting from morning and afternoon traffic to public services, parks and entertainment. Get to know the neighborhood, the schools, the business areas and everything that might make a difference.

If you have the option to rent a property and buy it later on take it. Get to know the property’s quirks, advantages and disadvantages. You would have asked for a 14 day money back guarantee if it was a stereo, wouldn’t you?

#2 Have a chat with the neighbors

From my experience this is an excellent tip. It is a bit embarrassing at first but your neighbors a vast resource of information, especially when you’re buying with no previous knowledge of the area. Your neighbors will be able to tell you almost everything I listed before. How good the municipal and public services are, how bad is traffic, how are the other neighbors and the neighborhood. They may also tell you how price levels have progressed over the years and what are their thoughts on what future potential the area and property have.

#3 Get a house inspection

Though I myself have my reservations on this one it sure can’t hurt. The problem with house inspections is that they are very limited to what may be observed. They won’t go around drilling holes and cutting pipes. Still, a good, thorough inspection might save you from buying a property in a worse condition that you were bargaining for.

#4 Don’t bite off more than you can chew

Usually, as with every project, expanses outweigh the initial budget. However, this is no excuse to go spending over your abilities. The rule of thumb is not to spend over 30% of your income on housing and not borrow over 70% of the property’s value. Plan ahead and try your best to stick to your budget. Remember your current financial situation might change, for good or bad (plan conservatively).

#5 Consider future potential

Buying a property should also be regarded as an investment. You are paying too much good money to see it just stay at its present value with no return on investment (a huge alternative lose as you could have rented and invested the rest). How do you research potential? Consult with professional real estate agents; consider the future development possibilities, future growth of the area, location (location, location…) and much more.

#6 Make sure it suits your needs

Are you planning on getting married? Having a kid or two? More importantly, what’s your wife planning? It is important to buy a home which will also suit your future needs. I believe a newly bought home should last at least 10 years. Otherwise the deal costs are too significant to ignore and it is more economically sound to rent. Consider the future possibilities and keep them in mind when comparing properties.

#7 Make sure you can afford the maintenance


Many people have dream homes with huge lawns and gardens, maybe a fountain or two. Big homes with many rooms and outdoor space are also expansive on maintenance. Since you are probably able to afford the property, maintaining it should be relatively easier. However, are you willing to spend so much money on it? Are you aware of all the costs?

Taking the time to research a property properly can help make the difference between a successful investment which suits your need and a poor one which you will have to replace soon enough. More ideas and comments are always appreciated.

... Kristin, from The Financial Engineer, posted a very good comment on the need to take a trip to city hall and thoroughly research future development plans for the area. This advice is priceless. Simply imagine that beautiful garden you have across the street changing into a garage...

3 comments:

Monroe on a Budget said...

I like your tip of being prepared to live in that home for 10 years.

Kristin said...

A home inspection is well worth the cost.

Also, I recommend a visit to city hall to check on the future development plans for the area, zoning, new roads/highways, etc.

Dorian Wales said...

Thank you for your comments. Kristin, I think that is a very valuable tip. With your permission I'll add it to the post.

Regards,

Dorian