Your first home should be a good investment

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Actually, all of the real estate you buy should be a good investment, but first time home buyers often overlook the investment for the emotional pull of upgrades, proximity to friends and decor. A home is a personal thing for sure, but the reality is- buying a home is not like finding that one true soulmate you will spend your forever with. Rather, there are many houses in any given area that one could buy and be very happy living in.

A house is a shell of wood, brick and windows- it’s the people that make it a home. It’s the memories and the drive home after a long day of work. It’s calling it “my place” and spending time and money and energy fixing the faucet and mowing the yard or putting your favorite colors on the wall. It’s waking up there and creating your own space.

When buying home for the first time it is especially important to get a good investment because chances are, you won’t be staying more than a few years and you’ll want the equity from the home to buy your next place. Buying a home that is a good investment can be a major part of a solid financial standing. The tax benefits and equity earned can have a huge impact for people.

I bought my first house when I was 20. It was not a nice place, but it was a good investment. I actually bought it to flip. I figured I would take the money I would make from flipping it and buy a home to live in but my wife wouldn’t have it- she wanted out of the apartment lifestyle as soon as possible. So we remodeled and moved in. I sold the house a couple years later and made around $40,000. Not a ton of money, but for someone in their young twenties who is starting a family it’s a fortune. I could not have saved that much by putting away a little from every paycheck and clipping coupons.

Real estate has been my best investment. The stock market hasn’t been bad for me, but the investment/return on my real estate blows away my stocks. I can buy a home for zero out of pocket and make tens of thousands of dollars just by living there. Everybody’s paying a mortgage, either their own or the landlords. I might as well be the one making the money, right?

If you are in the market to buy, or have been sitting on the fence, undecided about whether to buy a home thake my advice, find one of the best Realtors in your area and let them help you find a good, solid investment as your first home- you’ll be glad you did.

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8 thoughts on “Your first home should be a good investment

  1. Respectfully Greg I must disagree with you about a “home” purchase being thought of as an investment. I must also preface my comments by saying that until I purchased my second home, I thought of it as an investment as you do.
    I do invest in real estate for a living so I see the value and understand all that comes with it but when it comes to the place where I make my “Home”, it’s a different game. I have come to realize this since I actually moved out of my first home and purchased my second…
    When somebody purchases a home, they are living there, raising a family, entertaining family and friends, having birthday parties, etc…that is the return they get on their “investment”
    When you buy a “home”, you are buying a piece of property that fits your needs at that particular time. Maybe you need three bedrooms and 2 baths or 2 bedrooms and 1 bath and a finished basement, regardless, you have a specific requirement.
    You purchase the home based on your requirement. When you finally grow out of that requirement you sell the home you purchased and look for another…
    If you make some money on the sale of the first home that’s great but if you celebrated the first birthday of two of your children there then to me that is enough of a return on your investment even if you just break even on the transaction. If you overpay by $10K for your new home but it has the 2 car garage and the white picket fence that you wanted in the neighborhood you wanted to raise your family in then you did alright in my book…
    I think especially in today’s market, the important thing is to find the property that you fall in love with and what more can you ask for…
    When you grow out of your first home and need to upgrade to a bigger house, you need to realize that there is a tangible “need” for more space and whether or not you make a profit on the sale of your first home, you still need a bigger one. If you disregard the idea of a “home” being an investment and focus on the fact that you are going to raise a family there and build some lasting memories, the rate of return on your “investment” looks a lot less important.

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  3. Great post. Most first time buyers prefer properties with bells and whistles and overlook the investment side, completely.

  4. I’ve been reading your blog now and again for the past couple months. I can’t help but feel that there is heavy influence in between the lines always encouraging people to buy. I can’t help but feel that is the point of this blog. Granted you are marketing real estate for a living, I shouldn’t be surprised.

    Pushing people into the market serves the real estate industry, not the potential home owner. There is a great deal to be said about taking on a mortgage you can’t afford just to get into the market. You don’t die if you rent. You don’t necessarily make less money. It can be a good investment, but like any investment it could be bad.

    I’d like to see a post or two on what you consider the negatives are for a booming real estate / land development. Seems they are always left out of mind.

  5. Rob, you make some good points and I agree about finding a place you will comfortable with because you’ll be living there. For many of my clients the moment they have moved in and realize that this (first) home is theirs and they own in and feel that pride, is the moment they begin to make the house a home.

    But often first time home buyers don’t have the means to buy their dream home, or even something they love. They are just getting into a home and want they best they can get. When buying your first home, sometimes it’s easy to focus on the emotional part without enough respect toward the investment side.

    Matt,

    To find one of the best agents in your area ask friends for referrals, call large brokerages and ask the managers about their best agents. Realtors who do a good amount of business but still give their clients the focus they need- agents who know the area and the market very well. If you’re in the Salt Lake are it’s easy- just call me.

    Pete,

    The reason my blog may seem like encouraging people to buy is that is the audience of the blog. Aside from other real estate proessionals, the majority of my readership are people already in the market to buy or sell a home.

    People don’t usually find a real estate blog, or at least mine, or my real estate website (which directs a majority of my blog traffic) unless they are looking to buy or sell a home.

    With that in mind I write toward that audience. Also, I write about what interests me and buying and selling homes interests me.

    I do like your suggestion about writing about negatives and I’ll consider that. Good luck to you…

  6. Greg

    Upon further thought and consideration I will concede a bit to say that maybe first home buyers don’t think enough about the investment side of their purchase as they should. I thought about my first home and thought about first homes in general and buyers typically fall in love with the backyard and the kitchen and the doggy door, etc…but don’t think too much about the future and the next home they are going to be buying and how the sale of the first will impact the purchase of the second. I do still feel that as far as a buyer’s second home and more importantly the purchase of a home they plan on spending at least 5-10+ years in, the investment factor should be taken out of the equation since the buyer has gained some experience and is now buying most likely based on some occurence such as a job relocation, new baby, etc…
    The “test” if you will of whether a purchase is an investment or just buying the home because it’s the home you want is the market in which a home is purchased or sold. As an example, the house I live in now I purchased for what I consider to be about $12,000 over the market value. The seller would not come down to where I wanted to be and I didn’t want to keep looking. I did this because it’s the house my wife wanted and it’s a house that I can see myself in for 20+ years. As an investment, I made a bad decision but as a home buyer, I found the home I wanted and didn’t care about the market and what I will do if I have to sell down the road and need to make up that $12K. I’ll cross that bridge when I get to it…
    The same goes for selling a house. If somebody has outgrown their 2 bedroom ranch because of a growing family do they wait for a buyer’s market to go house hunting? I don’t think a pregnant wife is willing to wait it out to see if she can have her dream nursery.
    An investor would almost never buy in a seller’s market and that’s the big difference…sure their are exceptions to the rule but I am speaking generally. Investors typically hold out for a buyer’s market to get the best deals…

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