One of the most important purchases you will make in your lifetime is a condo, house, or investment property. Not only does buying a home cost a significant amount of money, but you’re likely to hold onto it for many years to come. It’s also a huge responsibility, from the moment you get the keys to the entire process of trying to sell it once it’s time to move on.
On the surface, the equation might seem simple: if you’re paying $1,000 per month in rent right now, why not better your lot and start building equity with a mortgage instead? The hurdle for most people, of course, is getting past the lump sum of a down payment.
between a 5%, 10%, or 20% down payment is a great way to determine which payment structure might suit your needs, or if purchasing real estate might be a premature decision. Bear in mind that while a 5% down payment might seem like a no-brainer, you’ll be paying interest on 95% of the value of your home – so choose wisely.
Aside from your down payment, your mortgage, and related taxes, you’ll need to have enough money put aside to shoulder repairs at a moment’s notice. Burst pipes in the winter, water infiltration after a rainstorm, appliances breaking down for no reason … if you are not able to maintain an emergency fund, you might want to stick to renting for the time being and let your landlord handle these types of headaches.
Being ready to invest in real estate is synonymous with being ready to research, grow, and learn. If you’re living in a condo building, you’ll need to get familiar with the workings of your HOA and understand what you’re getting for your condo fees. If you’re buying a home that shares land with other people (common yard, front steps, etc.), you might be entering into a co-ownership that has its own set of rules and financial obligations. If you’re looking into an investment property, you’ll need to become an expert in tenant rights and landlord responsibilities.
Sturdy financials, solid planning, and a willingness to learn and adapt – if you can check these three boxes, you are well on your way to becoming a responsible property owner!