Best Real Estate Advice I Can Give: Never Sell Your First Home
As a short backstory to preface this article, I am going to tell you how and why I got into Real Estate. As a young high school grad, like most people, I had no clue what I wanted as a career. I spent years in college swapping majors trying to determine what it was that I was good at, and what I could see myself doing for the rest of my life. Eventually, I decided that whatever it was I was looking for was not going to be found in school, so I dropped out. For the year after I dropped out I worked as a server and did a lot of soul searching. After many self help books and researching- I discovered an interest in Real Estate Investing.
As a broke college drop-out I was missing an important ingredient to invest in Real Estate and that was money. My mom had been a Real Estate agent for the past 18 years of my life, and I knew she made good money even without a college degree. I figured this would be a good way to learn the most about Real Estate investing and create an income doing something I enjoyed. So I moved home, got my license and started working with her selling and managing real estate.
Since then my life has taken a different turn from my original plans. I ended up marrying my wife and building a home in Appling. We don’t plan on ever selling it, so I will just adapt my plan to where I am in life. However, if I were to do this again as a single person or even a couple, here is what I would do.
First off you must understand that the first home you buy is not going to be perfect. It’s going to be far from your dream home. In fact, there will likely be sacrifices of convenience involved. The main goal of your first house should be to build lasting equity. As long as you don’t sell the home, this will be the start of a generational wealth for your family.
There are a few different types of properties that can build you equity. One of the best properties to look for is a multi-unit property. Most people don’t know that you can get an FHA loan on a multi-unit property up to 4 units as long as you occupy one of the units.(If you are not familiar with different loan types check out my previous article) Admittedly, a multi-unit property to purchase will be hard to find. However, if you do manage to find one, you will basically have a cheat code for this model of building equity. Immediately, you will obtain an income generating property for free, or at least at a major discount depending on how many units and your mortgage payment. This would be the best option, getting a place to live for free while building equity for free.
Another option would be to purchase a 2 bedroom or 3 bedroom house or townhome. A townhome will cost less than a traditional home and have less maintenance. So, building equity in a townhome will be cheaper. Also, the cost to maintain the property once you move out and put a tenant in it will be less. Obviously a townhome is not ideal, but at this moment in life would you really need more?
Maybe you do need more room. You have dogs or maybe kids so buying a small town home is out of the question. Luckily buying a traditional home is still an option. There will just be a few things to look for. First your home search should have a budget substantially lower than what your maximum approved loan amount is. You want to build equity when you are young and minimizing expenses is a great way. Additionally, you will want to look for a home that you can easily add value to. Think about updating floors, paint, bathrooms and kitchen. Stay away from anything that needs major repairs. The goal is something that you can move into and live in immediately. The cost of paying rent, carrying a mortgage, and paying for repairs would be the exact opposite of what we are trying to accomplish.
The end goal is to rent out either your townhome or traditional house without losing the equity that you created. You will have to save up money to buy your next property, which is why I have been trying to push the necessity of minimal expenses.
If you are not lucky enough to find a multi-unit property there is a good way to make-up that difference and get a “discount” on your mortgage. That would be to get a roommate or roommates depending on how many bedrooms you have. You won’t be able to get premium rent for one room, but any little bit will help offset your monthly payment.
No matter if you buy a multi-unit property, a townhome, or a traditional house, you are still moving in the right direction and doing way better than someone who doesn't even know to think like this. Just remember never sell your first home. Hold onto it and build equity for the future. If you really want to change your life with Real Estate just repeat this process until you have 10 or maybe even more homes!