Over at Bankrate.com, there is a very recent article titled “5 major must-haves for a fab first home.” Nobody has anointed Bankrate.com as the know-it-all of housing, but it is a popular site, and some of their material is also being written about on other sites frequented by potential first time home buyers. So, let’s see what this article has to say and how it is good information to keep in your investor research folder.
1. They’ll be in this home longer – The term “starter home” is misleading in today’s home market. It used to mean a temporary abode, one they’d be in for a short time until their first pay raise or child, and they would upsize then. However, in the current and near future real estate market, they won’t be able to sell and roll up equity, so the advice now is to plan on being in the home for seven to 10 years. **Investor note: Whether buying to flip or to rent, homes with enough bedrooms and baths for this longer occupancy should be a better investment.
2. Make an affordable decision – First time buyers are being cautioned to search really hard for the best deal, as they have no equity from a previous home to roll into this one, and they will most likely have to pony up a high down payment. The other caution is to look down the road and not over-extend themselves based on anticipated future raises or income. **Investor note: While it seems like diametrically opposed goals, you’re probably going to do better if you can balance low price with that increased bedroom count. It could mean focusing on neighborhoods with larger homes at lower prices that would have been low on the list for buyers pre-2007, but will now look more appealing.
3. 10 year plan – The article became a bit redundant here, as it tells them again that they’ll be in the home for a while, so plan for family growth. It does mention remodels to increase the size if they buy one too small. **Investor note: Same as in item #1, but adding that investing in homes that offer better remodel opportunities for upsizing could make a difference. If you can buy a smaller home on a nice lot, and the local codes are friendly to additions, it could increase profitability.
4. Location, location, location – All of the old standby cautions are here, like proximity to work, shopping and recreation. At a time when it is more difficult to accomplish, they are being advised to look for neighborhoods without a lot of for sale and for rent signs. **Investor note: One bit of advice in this part of the article was for the first time buyer to check Homeowner Association Dues delinquencies to see if there could be a future rash of foreclosures; not a bad suggestion for the investor as well.
5. A history of proper maintenance – This section is not really going to be applicable in many cases, as it’s about the way the previous owner maintained the home and hints about what to look for to make an assessment. With so many of the best bargains coming out of foreclosure or as flips from foreclosure, there’s probably a lot of work to be done, or there has already been rehab and the house will look pretty good. **Investor note: If you’re flipping for retail sale, make the home look good. If you’re flipping to a rehab flipper, find homes they can make look great and still sell cheap for a profit.
It always helps to know what your buyer is thinking. Articles like these are being read by millions of potential first time home buyers. Without previous buying experience, they’re more likely to be carrying an article like this around with them.
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