Deciding to purchase a home is a huge financial decision. It can also be an incredibly emotional process but the decision should ultimately be a financial one. We know you?re excited about buying a home. Whether it?s your first, second, third, etc. A new home is a new chapter in your life. The possibilities are endless and excitement is uncontrollable. As a real estate agent, we?re here to help guide you through the process as best as we can but your mindset needs to come from an objective place.
Real estate is a great investment and it begins with your first home. If you don?t understand the risks and benefits of all the ins and outs of buying and selling, how are you going to learn to build your wealth? It?s important that as a first-time home buyer, you treat this decision with as much reverence as you would any large investment. Make sure it fits your needs right now but can also help line your pocket later.
Here at Ankeney Real Estate, we don?t believe in the concept of a ?dream house?. When you purchase real estate with a dream house fantasy, the decision is ultimately emotional instead of financial. When it comes to buying real estate, there is too big of an opportunity to set yourself up for the rest of your life to be an emotional decision. You do need to feel connected to the home. You should absolutely see yourself living there. You should love the home you?re about to live in. Feeling connected to a home is important and it matters but it also needs to make sense financially.
The Argument to Leave Emotions at the Door
Leaving emotions out of large decisions doesn?t only apply to real estate. Psychology Today points out four different ways emotions can play a negative role in decision making. Two of these in particular can easily be applied to a home search. Excitement, which is a completely reasonable emotion, can lead to unrealistic expectations. This might cause you to set a budget that?s maybe a little too high. It can also make you feel prepared to take on a project that is a little over your head (we?re looking at you fixer uppers!). Excitement can cause you to be more willing to take risks and that?s not something you always want to do when buying your first home.
On the flip side of that, if you start to feel discouraged by your situation or maybe you?re desperate for this new change, you might be more willing to settle. Being flexible during the homebuying process is great. It means that you are open to different possibilities. Being willing to settle for something because you think it?s good enough is not ok. A good real estate agent has the ability to help navigate a lot of these different emotions so that you?re making a decision that is smart financially in the long run.
Seeing the Financial Opportunity
Once you have your emotions in check, it?s time to look at the reasons why a home is a great financial opportunity, therefore making the case it should be a financial decision. Forbes shares several benefits of home ownership especially during tax season. Two in particular are great to call out. After purchasing a home, you begin to build equity. Equity is how much you can sell a property for minus what you owe. Each month when you make a mortgage payment, the equity increases. It?s actually an inadvertent way to save money. Who knew?!
Besides building equity over time, buying is almost always a better decision financially in the long term compared to renting. You will never get anything back from a rental. You keep paying into a system that has no benefits for when you leave. The landlord is the one making it out with a profit in the end. Like mentioned earlier, paying into a mortgage increases the equity in your home which then inflates your savings.
Resale value is another financial benefit of buying a home. For example, if you could find a home under $100k, how much do you think it would sell for in 10 years? If you?re looking at a home purchase as a financial decision, you?re probably looking for a property in markets that are trending up (areas where real estate net worth is increasing over time). With that said, your home?s value is likely to increase even in just 5-10 years. So when you?re ready to move on for whatever reason, your original purchase will pay you back and then some.
Now, emotions aren?t completely useless when purchasing a home. Like we said earlier, you do need to feel a connection with the house and be able to see yourself living there. Settling is not in our vocabulary. Even though this should be a financial decision, making a purchase this significant will naturally make you want to invest more of yourself into it than any rental would. Owning a home is an incredible accomplishment, especially your first home. You should be proud of it and that in itself will encourage you to make the best of the property, inevitably increasing its value for when it comes time to sell.