What to Look For When Buying a House
Mindy Jensen has been buying and selling homes for more than 20 years. Her preferred method of investing is the flip buys a house, moves in, makes it beautiful, sells it after two years to take advantage of the Section 121 Capital Gains Exemption, and starts the process all over again. She is currently working on her ninth live in flip. She also the co host of the BiggerPockets Money Podcast.
As both an agent and an investor, Mindy LOVES real estate. She has taken part in syndications, private lending, and deals involving seller financing. She owns a single family rental, a short term rental, a mobile home park, a co working space, and her most recent purchase a caboose!
Mindy is an alumnus of the School of Hard Knocks and will happily share her experiences with anyone who asks. When you can get her to stop talking about real estate, you can find her on her bike or adventuring in the beautiful mountains of Colorado.
Mindy is a licensed real estate agent in Colorado.
After driving around a few neighborhoods and keeping a diligent eye on listing platforms like Zillow, Redfin, and the MLS (which you can access through a real estate agent) you should start to form an understanding whether the types of properties you want to buy and those that meet your financial goals actually exist. It’s your job, not your real estate agent’s, to determine what you want and whether those wants are realistic.
Let’s say that again. It is your job not your real estate agent’s to determine what you want and whether those wants are realistic. You are the one who will be living there, and you are the one who will be paying the mortgage. Your agent can help guide you toward homes that fit the parameters you have set up, but your agent should not be deciding what you want.
In order for your agent to help you transact on the right house, you will need a crystal clear definition of what kind of purchase you are willing to make. Plus, the more you know in advance, the less likely you are to be distracted by a feature in an otherwise unsuitable home. (As much as we love smart lights and phone charging stations, they probably aren’t a top priority.)
1. What is the maximum price you’re willing to pay?
To help with this, take your price and run it through a mortgage calculator. This will give you an idea of the monthly payment you would be making on a home at that price. Make sure you also include home insurance, property taxes, and any extra fees like private mortgage insurance (PMI) when estimating your monthly cost.
Depending on your market, there may be some benefit to looking at homes slightly outside of your prescribed price range. A seller may be willing to take a lower offer than the list price.
However, if you do decide to look for lowball opportunities outside of your price range, it important to keep your head on straight. You already decided a maximum price if they don accept an offer below that price, you have to walk away.
2. How much house do you need?
Of course, you should know the number of bedrooms and bathrooms you’re looking for, and we strongly recommend having at least two toilets. (In addition to the obvious disadvantages, a home with only one bathroom is outdated yes, even if the rest of the home is remodeled. Houses with two toilets sell faster and for more money than houses with only one.)
Also consider whether you need a home office, basement space, or garage space, and how big a yard you’ll want, and make sure you’re thinking five to seven years in the future. If you plan on expanding your family or currently have small children, take that into consideration. (Spoiler: They get so much bigger!)
Buy your first home with your eyes wide open
This is a modified excerpt from by Scott Trench and Mindy Jensen. To get more first time home buyer tips along dishware hermes replica
with some great bonus content, in the BiggerPockets Bookstore!
3. Where do you want to live?
Location, location, location it the one thing you can’t change about your home. You probably know what city you want to live in, but are there other options nearby that may also work? Compare the resident amenities like recreation centers, city parks, and downtown features like shopping and restaurants. There may be better cities for you than the one you’re attached to or if there aren’t, that information will help cement your original choice.
Then, zoom in on the smaller details. One thing you might be tempted to ignore is your personal commute time. Though houses might be better on the other side of town, do you really want to spend hours each day commuting to and from work? When considering a home that would add to your current commute, we strongly urge you to drive your expected route during rush hour to see just how bad it will be. If sitting in traffic and spending more money on gas is your idea of a good time, go for it! (If you work from home, the world is your oyster.)
While it may sound irrelevant if you don’t have children, buying a house in a good school district is always a plus. Homes in a good district sell faster and for more money than houses in a mediocre or worse district. Kids or no kids, you’ll still enjoy the benefits of that district when you go to sell. However, a good school district often comes with higher property taxes. Make sure those higher expenses are worth it by looking at similar homes in both districts at least online to compare pricing.
Last but not least, some parts of the country have huge floodplains while others have smaller ones or none at all. If your property is located in a floodplain, you’ll need to purchase flood insurance, which can be quite expensive. Flood insurance is available only through the federal government, which unfortunately means no price shopping.
4. How updated should the home be?
Are you looking for something more polished, or something with which you can force appreciation? If the latter, you should know which projects you’re willing to take on. Home renovation shows might be a great source of entertainment (move that bus!), but the projects on TV are never as simple as they seem. You might walk into an older home and think, Well, I can just tear down that wall to open up the kitchen. Instant value add! Though the idea is tempting, you might regret that decision down the road.
Make sure you consider your DIY skills before diving into showings. What projects might you be willing to tackle to add value to a home? What’s completely off the table? This depends entirely on your own abilities, or at least your willingness to learn any new skills needed to execute your plans.
You might be happy to update the paint, landscaping, and appliances but not be willing to commit to any major projects that involve a contractor (like moving walls, repairing the foundation, updating the electrical service, fixing the roof, or any other high ticket items). Maybe you’re fine replacing the floors, but you don’t want to deal with windows. Just make sure you know your limitations so you can avoid those items should they come up.
A basic understanding of big ticket problems will help you immensely. Follow our DIY inspection checklist to learn what to look out for. Red flags like mold, water stains, or cracks in the ceilings or walls can indicate major leaks, for example. These signs of water damage might instantly knock a home from the running and save you money on an inspector.