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 market’s valuation (as opposed to trade-up homes and luxury homes).
And that’s where the dilemma really lies. That’s because there are costs associated with buying and selling a home (as well as moving in and out).
Also, since the bulk of the mortgage payments for those first years goes to interest, you 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, it might not make sense to buy it in the first place.
So should you not buy a starter home?
Nope. There are definitely 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 and will help you build up equity.
Another scenario is if the home has potential, and you can imagine it becoming your forever home with the right renovations or additions.
Still another is if you are open to keeping the home and renting it out later should your plans change.
Ultimately though, this will be a decision that that’s based on your own unique preferences and location.
When you weigh all of that, and 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 coming up soon.
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 will have the most choice, at the most affordable prices.
If you have questions about the current Northern Virginia real estate market, including whether a starter home is right for your unique circumstances, give Redux Realty a call at 703-350-2830. We’re here to help.