Buying a home can be a dream come true. In addition to digging roots in the community, homeowners look at the potential investment this property can turn into. Building equity instead of paying rent is a big attraction and so is the potential of selling the property eventually.
But if history is any guide, many people have seen their dreams crash when the global financial markets collapsed several years ago. Although foreseeing market swings may be difficult, there are some things to think of when you’re buying a home to make sure that your investment is right for you, and it will pay off in the long run.
Understand the costs
Comparing your mortgage payment to the rent you’re paying now doesn’t tell the whole story. Homeownership involves a lot more costs in terms of maintenance, utilities, potential taxes, etc. Your real estate agent or lender may be able to give you an estimate of these costs, but you also must be prepared with enough cash to start – in addition to your plan downpayment – for all the initial costs and repairs.
Think of how you will be able to manage major maintenance costs down the road – which can come your way shortly after purchase if you’re buying an old house. Plumbing, electric wiring, roof repairs and similar major home-improvement projects could cost you hundreds, if not thousands, of dirhams. Will you have the resources to handle these repairs and maintenances costs, which may be urgent in some circumstances? If not, are you in a position to take even more debt and be able to pay it off comfortably? These are critical questions that must be answered before jumping into buying a home.
Think resale value
Because a friend of yours is seeing his or her property rocketing in value doesn’t mean that yours will, too. There are so many market factors that determine property value, and the only way to estimate if you’re making the right investment is to look closely at these various parameters, which include location, potential growth of the neighbourhood, transportation and accessibility, schools, crime rates, availability of comparable properties for purchase, etc.
The biggest task would be to look forward and predict the potential changes. In established neighbourhoods, the changes are often incremental and predictable, but if your purchased home in a new area, many of these points may remain unknown.
Know your needs
Because of the initial costs and the fact that real estate prices appreciate over long periods of time, it is important that you hold on to your investment for a while. Some experts recommend five years at least before you consider selling it.
To be able to do so, you must look at your potential personal and professional life changes. Are you happy with your job and planning to stick with it for several years? If not, will you be able to find another job within a reasonable commute from your planned home? Other life changes may include starting a family, getting a divorce or sending children to college – all of which may make a home too small or too big for what’s required.
Although rent may be costly, it does provide flexibility and less commitment to one location – both are important for young professionals whose goal is to get the best job and be nimble in their decisions. So make sure that you don’t rush into homeownership until you’re for it.
Do it right
Finding a great opportunity, you may rush to close on a house as quickly as possible. In this adrenaline-driven decision, you may overlook some issues with the property, waive inspections or simply don’t take their time to look at everything that you once wanted in your future home.
In addition, you may not shop for the best mortgage rates and lender services. All of this may come to haunt you later in the purchase process and beyond. Because buying a home and taking a mortgage are long-term investment decisions, it is important that you do it right. Take your time to look at all the options on the table. In addition, you must not skip critical steps such as having a thorough inspection and being fully aware of the condition of property.
Things to ponder
- Be prepared for initial and ongoing expenses
- Study the location and future neighbourhood growth
- Can you keep it for five years or so?
- Don’t rush through the process
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
