Many people have made thousands or millions investing in real estate. Just because someone you work with, or someone you see on the television has done well, does not mean you will, especially if you are buying a home.
It is reasonable to expect your property to appreciate in value over time. However, relying on that could result in your having no home at all if you are unable to pay the mortgage and the bank forecloses on you.
Consider the hidden costs
Stretching your finances too thinly because of your dreams of making a future profit can be disastrous. Here are some things to watch out for:
- Extra buying costs: If buying the property will stretch your budget so much that you cannot afford to get a comprehensive survey, then you need to find a cheaper property. A thorough survey is crucial to ensuring you make a wise investment.
- Insurance: A lender will want to see proof of insurance before they agree to finance your purchase. Yet, when it comes to renewing the policy, do not be tempted to save a few hundred dollars by not renewing. If something goes wrong the costs will be much greater.
- Maintenance: Every home will need maintenance at some point. Failing to do it on time because you have run out of money could lead to small problems becoming big ones. That in turn could reduce the resale value of your home, making it worth less than when you bought it.
- Job security? It takes seconds to lose a job. It could be down to something you did or something out of your hands. If paying your mortgage is dependent on your maintaining that exceptionally well-paid job, consider if that is a risk worth taking. A lower-priced property builds in a safety cushion.
If you are confident a purchase is the right decision, remember that signing a real estate contract commits you. Having help to understand what you are signing will be crucial to your chances of success.