First Time Home Buyers
When buying your first house – Buy what you can afford, not what the bank will let you afford. That’s how countless people have gotten into deep trouble and
ended up in foreclosure faster than they could have ever imagined.
My rule of thumb is to buy 3 times what you bring home in a year. So if you’re making $50,000 a year buy a house that is $150,000. If you go to a bank they will say
to take out a 30-year mortgage which will make your mortgage cheaper and you could afford up to a $200,000.
Read this over and over – DO NOT BECOME HOUSE BROKE. What this means is don’t buy a house where the payment takes almost all of your income. So many people do this
because I guess it shows their friends how much of a house they can afford. And this is a main cause of people going into major debt problems. When your house
is taking all of your hard earned cash, you then start going out and buying things on credit. And you keep opening credit cards to buy things for the house and going
out for entertainment, etc. Then you make the minimum payment on the cards because the house is taking all your money.
Here’s something to think about if you’re a single person and you buy your first house. Have one of your friends move in and charge some rent. That will help you
out with the mortgage and utilities. Then you can increase your savings and minimize your expenses all in one shot.
Buy a Rental property
If you’re looking into buying a rental property “Congrats!” I strongly believe everyone should be buying one. If I had to make a recommendation then I would say
to look for a duplex/multi-family.
If you have a single family house if the tenant moves out you have to make the house payment plus any other expenses on that property until you find another
tenant. Now if you have a duplex and one tenant moves out you still have one tenant in the property giving you money which means less money coming out of your
pocket to cover the remaining expenses.
When purchasing a rental property here is the key to buying……BUY THE UGLIEST HOUSE. You might have heard this theory before and it is the truth. When I first
started out buying properties I bought the ones that needed a little fixing up so they were basically priced a bit under a normal house price in the area. So I
thought I was getting a good deal. And I have noticed that everyone does the same thing when buying their first rental property they’re going the safe
route I guess you call it and buying the house that needs that little work to get it into shape.
Then I started buying houses that were so ugly you didn’t even want to go in there. I mean I have walked through some houses that were just absolutely
disgusting. Sometimes I had to cover my nose and mouth because the smell was just horrible. It’s better to buy a house with no plumbing, holes in the wall, windows
knocked out etc. Buying this way basically means you have to rehab the entire house which is what you want. So when it’s all done you have almost everything
new in the house. What does this mean…house looks great, tenants love it, things won’t break, appraised really high because it’s like a brand new house. And
with buying a house like this you probably bought it so low to begin with, there will be a lot of equity after you finish fixing it up. When it’s rehabbed and
freshened, then you can use it for your next rental property.
Here’s a quick equation to consider when looking at every rental property you want to buy:
Rental Income – Mortgage, Taxes, Insurance, Water/Sewer = Profit
Don’t spend money unless you really really have to. Like if the faucet is ok looking but you want to go buy a brand new one just to make it look better
or if you want to replace the lights with ceiling fans. Cash is King! Keep that cash in your pocket or bank account. If things work leave them alone. You
always want to have extra cash sitting around in case things break and that’s when you want to spend your money.
The Ugly House
Buying the ugly houses will make you rich! Never, ever pay full price for a piece of real estate. You want to walk into the place that you’re buying and the first thought
that should come through your mind is that you don’t even want to walk through this house because it’s so ugly.
Say you’re looking at the houses in the area and they go for about $100,000. Picking up a house that needs some work might be selling for $85,000 which you might
think “wow” $15,000 under value that’s a good deal and I’ve seen so many people do that. What you want to do is to buy a house for like $50,000 or $60,000, approximately
half off the going price for that area. You might be saying no houses go for that cheap. Guess again, they do. You just have to keep a lookout and keep doing your
homework. I would rather have 1 house that I bought for half off then 5 houses that I bought for say 10-15% off.
How Will Real Estate Help Me In Retirement
I believe everyone should own at least one rental property. If you’re working and your employer has a 401k that you have been investing in for many years and have a
certain lump sum amount of money in there you really can’t retire until your 59 ½ because that’s when you are able to take that money out without tons of fees and
penalties. With a rental property, you could have that paid for and making you pure income until you can get to your 401k money. You could get by living off what
the rental property would generate each month until you reach your 401k vesting age.
Also, if your rental property is making $500 profit a month, for example, that income could be used to apply to your car payment or utilities in retirement and for
your whole retirement that expense would never have to be looked at again.
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