How to Get the Most Out of Buying Your First House

When you’re young, buying a house seems either daunting because of the sheer amount of money you need or like a hassle that will tie you down for the future. No more freedom to go anywhere you want, and hello responsibility. But here’s the thing about buying a home: it’s better than investing in gold. In fact it’s one of the best investments you can make.

You have a couple of options: buy a house, make some improvements, and flip it, or buy a house and settle in for the long term until property values really appreciate. In the future you could decide to stay there because you like it, or sell it and find a better place. Flipping the house right away is more of a gamble, but it can definitely pay off.

Flipping a House

Typically, when people want to flip a house they buy a “fixer-upper.” The house in need of repairs can only rise in value—unless the neighborhood is extremely crime-ridden and the other houses are low quality. Even then, improving the fixer-upper from the ground up can make a positive impact on the neighborhood, and value will go up because you’re investing money into it.

Here are some things to consider when you’re flipping a house for a profit:

  • To actually make good money, you’ll want to buy low in a market where values are rising
  • You need good credit to make this happen—pay off all debts and find out what it takes to raise your score if it’s low
  • You need cash for a down payment
  • If you qualify, you could take take out a Home Equity Line of Credit (HELOC)
  • The better the location, the better off you are when it comes to making a profit
  • As an investor, you’ll pay a higher interest rate on a loan
  • You’ll need to be educated on the real estate market, financing, negotiating with the seller, doing repairs and working with contractors, and which repairs really increase a home’s value

There’s a lot to flipping a house, but if it’s a game you want to play, there’s a ton of cash in the right market.

Once you’ve made your renovations, one big part of selling a house fast is staging. When you’re staging the home, you’re getting rid of all clutter. Locate furniture in such a way as to make it aesthetically pleasing—balance the amount of furniture in each room, float it out away from walls, and make sure each room only has one purpose. Optimize lighting by making sure no furniture is in front of windows. You can place mirrors in rooms strategically to increase natural lighting. When you’re arranging everything in rooms, find the most attractive focal point and arrange around it. Use art, rugs, pillows, and decor to make colors pop. Read some books on feng shui and see what you can do.

Flipping houses isn’t for everyone—in fact very few people can really do it successfully. Another option for making money from your first house is to rent it out.

Renting Out Your House

Being a landlord comes with its fair share of headaches, but it can become a way of generating passive income. Just like it sounds, this is income you earn without doing anything. Once you’ve paid off the mortgage and can afford to pay other people to do repairs, every cent you earn from rent is completely gratis.

Millennials make up a huge chunk of the rental demographic. There are definitely some things you should consider when renting to millennials:

  • Don’t discriminate based on age: If a millennial doesn’t make enough to afford the cost of living in your house, that’s good reason not to rent to them; but if you don’t rent to them because you’re young too, and you know how unreliable people your age are, that’s illegal
  • Make your subletting terms clear: Millennials may want to make some side cash through AirBnB or another vacation rental, make sure they clear it with you beforehand
  • Consider pets: You’ll be more competitive at attracting millennial tenants if you allow pets
  • Make sure everyone’s on the lease: They may want to move in roommates without you knowing
  • Prioritize green housing: Millennials prefer environmentally-friendly housing with things like solar power, ENERGY STAR appliances, and electric car charging stations
  • Prioritize safety: Up-to-date maintenance and renovations will ensure safety and attract good tenants

These considerations apply to all tenants, regardless of age. That said, if you make the place attractive to millennials, you’ll have a huge pool of tenants to choose from. You know from your own experience this is a generation of renters.

Like being a house-flipper, being a landlord isn’t for everyone. In the long term, you’ll get a lot more enjoyment out of turning your first house into your first home.

Living in Your First Home

Once again, this is daunting, but it doesn’t have to be if you take it one step at a time. Here are the big financial considerations for first-time homeowners:

  • Keep an eye on your budget: You’ve got mortgage payments to make, so don’t blow too much money right away on renovations, furniture and decor.
  • Make sure insurance is covered: You need more than homeowner’s insurance; maintain life insurance, disability insurance, and car insurance payments.
  • Make sure to get tax deductions and credits: There are tax breaks for first-timers; if you have to pay an accountant because of all the paperwork and limited time, do so—it’s worth it.
  • Maintain savings: You never know when an emergency will hit, so keep a savings pillow of at least a couple grand beneath you.
  • Keep records: Keep receipts of all purchases for your home, so you can maximize tax write-offs.

This last one is more important than it seems at first. If you have precise records on renovations and remodeling expenses, you’ll know exactly how much more the place is worth when it comes time to sell. With this baseline number and current property values, you’ll be able to determine a good asking price for the property.

As you continue on in your first home, make renovations you can afford and maintain the place to the utmost. There will come a time when property values are higher than they were when you made your purchase. That’s when you want to put your house on the market. There are absolutely no regrets if you put a positive effort into this. In the end, you’ll be ready to retire in a better place than you started.

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