Tuesday, September 30, 2008

Buy a House Where You Want to Live

#5 Saving Money Tip – Buy a House Where You Want to Live. As a continuation of yesterday’s post, I wanted to elaborate a bit more on buying a house. This post will not directly save you money, but it might in the long run. Many people decide to buy a house and they think about what they want in a house – say, 4 bedrooms, 2 ½ baths, and an eat-in kitchen, etc. Then they come up with the amount that they are willing to spend on a house – say, $300,000. Then they find out where in their area they can buy a house with 4 bedrooms, 2 ½ baths, and an eat-in kitchen for $300,000 and they buy in that area.

I think they are going about it all wrong. First and foremost, find a town, neighborhood, or area where you want to live. Scout it out – during the day, at night, and on weekends. Shop at their stores, go to their parks, and check out their schools. Meet some of the residents. If you like it, great, but also look other places. If you don’t like it, find another town/area to look in. Keep looking around the area until you find exactly where you want to live. That is more important than the number of bedrooms or whether the house has an eat-in kitchen. Trust me. It is. When you find the neighborhood or town that you want to live in, find out what is for sale. Are the houses in your price range? No? A 3-bedroom house costs $300,000? Well decide how badly you need that 4th bedroom. Which is more important – living in a town you love with good schools, nice parks, and friendly residents or living in a 4-bedroom house? Personally, neighborhood always wins hands down for me. You can always change your house. You CANNOT change your neighborhood!

Now in the short–run, this won’t save you money. After all, a 4-bedroom house in a neighborhood that’s not so great or a 3-bedroom house in a neighborhood that is perfect will both cost your $300,000. But after a few years, the better neighborhood will win out. The values on the houses will rise faster. And you won’t want to move to somewhere better. By staying in one house for a long time it will save you money on moving costs and mortgage fees.

In Real Life (IRL) – As I mentioned yesterday, we had $250,000 budgeted for a house 8 years ago. My husband has a job about 30 miles outside the city center so we could have bought a nice sized house far out of the city for $250,000. Problem is, I don’t really like the city that he works in. The city’s crime rate isn’t the greatest and neither are the schools. Because there is a lot of land, the building that has taken place there over the past few years has been out of control. And the infrastructure is not necessarily keeping up with it. But my husband made me check it his work town and I agreed. And I didn’t like what I saw. Sure, the two-story foyers and the gourmet kitchens in the new construction homes intrigued me. But I wasn’t impressed by the people I met in the malls or the all of the box stores I saw on the main road into town.

We looked several other places as well, but my criteria were that I wanted to live in a town. I wanted a town that I could walk to shops, parks and schools. I wanted a town that had good schools. A town that people took pride in. And we found it a town close in the city (10 miles away) and boy were the houses expensive. As I said yesterday – A 1950’s 3-bedroom 1-bath house was about $250K. Guess what? There was a reason the houses were so expensive because lots of people wanted to live here.
Fast forward 8 years and the housing market had made a very steep climb and has come back down again. But guess what? In my town, the values haven’t dropped as much as in other places. People still want to live here. The amenities that I liked so much attract other people as well, keeping the values in check. And in the end, when we really needed that 4th bedroom, we spent only $12,000 to turn our porch into one. Not much at all. Plus it added value to our home. Those 4-bedroom homes in the town where my husband works? There are quite a bit for sale because as the housing market has declined, those that are farthest out from the city went down the fastest. If we had bought out there, we probably would not have been happy – with the schools, with the overbuilding, and with neighbors in dire financial straits. We probably would have ended up wanting to move and we would have added one more “For Sale” sign to the block. Buy the neighborhood first, and the house value will take care of itself. You won’t be sorry.

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