Dear Friends and Clients —
Should you invest in a starter home?
Or is it a better idea to wait and save for your “forever” home?
First off, let’s make sure we’re talking about the same thing.
Economists often define a “starter home” as being in the lower third of a specific market’s value range (as opposed to trade-up homes and luxury homes).
For many homeowners, however, a starter home isn’t about price. Instead, it’s about how long they plan to stay there — typically, only a few years.
And that’s where the dilemma really occurs. That’s because buying and selling a home, as well as moving in and out, all have costs.
Also, since the bulk of the mortgage payments for those first years goes to interest, you’re also unlikely to build up much equity if you only own the home for a short while.
In fact, according to one estimate, the break-even point for a starter home is somewhere from 5 to 7 years. In other words, if you’re planning to stay in the home for just a few years, then it might not make sense to buy it in the first place.
So am I telling you to buy a starter home?
Nope. There are, however, good situations in which a starter home makes perfect sense.
For example, if you’re planning on staying put for 5 or more years, a starter home will save you money on rent, will help you build up equity and create net worth.
Or, if the home has long term potential, and you can imagine it becoming your forever home with the right renovations or additions.
Another option, is if you are open to keeping the home and renting it out as an investment property. Again, creating more net worth if your global financial picture will allow this option.
Ultimately though, this will be a decision that’s based on your own unique preferences and circumstances.
When you weigh all of that in, if you do decide that a starter home might make sense for you, then here’s something important you should know.
The best time to buy a starter home is fast approaching. That’s because fall is the season when starter home inventory peaks and listing prices drop, according to the real estate portal Trulia.
This means you should have the most choices, at the most affordable prices during the fall.
If you are curious what kinds of homes are becoming available around Central Pennsylvania area right now, take a look at this complete listing inventory:
For more detailed infromation about the current Central Pennsylvania real estate market and additional inventory, including whether a starter home is right for your unique circumstances, contact me at (717) 609-8265 or Andrew@kronenbergREG.com. I’m here to help.
Have a great day.