Buying a house is a dream for some, but a reality for most. Yup, you heard right! It’s easier than you think.
No, I am not a homeowner (Update: now I am!! Our tips truly worked…). But we are finally able to see what was once a distant fantasy as an approaching fact in life.
As a young family we really want to have our own place to live. It’s a challenge to rent, and can even be expensive. But until recently, I didn’t even consider home ownership. But that’s not the case anymore.
Here’s what changed. We didn’t suddenly have a boost in income. We didn’t have a drop in expenses, or anything of the sort. We discovered a little trick: buying to rent.
The single trick that allowed us to consider home ownership? Buying a two-family house, living in the smaller unit, and renting out the larger unit to cover the mortgage.
Okay, this might not work in some areas, but it will work in many.
Okay, before I go into this further, I need to give you some background. Where I live, two family homes are the norm. Rent on a 2-3 bedroom apartment in a two family house is on average $1600 right now. That is normally what the top level is. The main level normally rents out with the basement, is 5-6 bedrooms, and rents out for 2200-2500. At the same time, the average cost of such a home is roughly in the $4-500,000 ball park.
A little bit of math will help you figure out, that we’d definitely save money on monthly fees if we bought such a place. The rent earned on the bottom unit would normally cover all or most of the mortgage, and we’d have to cover a few hundred a month for taxes, insurance, and some of the renter’s utilities. Meanwhile, a generous 2-3 bedroom apartment in a quiet 2 family house is perfect for a young family. And when we can afford it, we can move downstairs, and rent out the upstairs. Or even live in both units.
Here’s the problem: the down payment AND the mortgage.
I need enough money for the initial payment, closing fees, and everything else. And I need someone to lend me the money. And what if you don’t have such options where you live?
I thought I’d share some tricks that allow us to save up faster on small salaries.
10 Steps to take toward buying a house sooner:
- Research the market – all that I shared above was the result of research that I wish I’d done sooner. Find out what’s available, and what can be done regarding fix-up homes, homes with rental properties built in, tiny homes with room for expansion, etc.
- Research mortgages – Find out what’s available, and what you need before you can get one. You might be surprised with small things like lower down payment requirements.
- Assess your home expenses – Figure out what your actual expenses will be once you do own a home (such as taxes, insurance…)
- Assess your living expenses – figure out what life costs. Do this by writing down expenses as they occur, three months in a row, and then averaging it.
- See where you can cut back – include smaller expenses in these figures. All those add up and can help you save up sooner.
- Consider living tighter for a while – we are currently renting a tiny place, that costs about half what we would pay in a place more suited to us. We are motivated by the dream of buying a house sooner. Doing something like that can speed up the process a lot.
- Work on your credit score – a better credit score will make for lower rates, meaning you’ll be able to afford it sooner.
- Side hustle – as I said above, I may be living tighter now, but it’s all for a better day! Do surveys, sell your handmade goods, or even start blogging like I do. EVERY PENNY of your side hustles should be put away for your down payment.
- Save wherever possible – not a penny of the money we received as wedding gifts has been spent. Save up as much as you can, as your savings will be the boost you need for buying a house sooner.
- Do the math – Take all the research from above, and add it up in two separate columns. One: current living expenses, and the second: future home expenses. Figure out how much your combined income is. Figure out how much savings you have. Now, add up how much you can save up monthly (do leave some space for things that come up). Compare living expenses with monthly home expenses. You may be surprised with how all your research adds up!
While we still have a long way to go before buying a house, that day is finally in sight!
Having your background information in place is essential to making a plan, and making a plan is essential to buying a house sooner.
It doesn’t need to be a distant dream. It can be a reality, sooner than you think.