Six years ago myÂ wife and I decided to purchase a home just before our wedding day. After a few months of looking we decided to build a starter home close to my work. It seemed like the perfect decision to make at the time. Interest rates were low, around 5.5% for a 30 years fixed mortgage. After looking at multiple apartments we realized that our rent at a nice apartment would be about the same price as 1,600 square foot home.
I’m not writing this article to tell you I regret purchasing the home, I’m writing to tell you I could have made an even better financial move than purchasing the home. We lived in the home for just over 2 years and sold it for a profit of about $8,000, not great but not bad for newly weds just out of college.
If you are ready to purchase your first house or home then you are entering the market at a great time. Right now home prices are down all across the nation, bad for those of us who already own a home, but great for those just entering the market. Also interest rates are still pretty low even for a fixed rate loan. Getting a great deal on real estate is pretty easy right now and it could be one of the most important moves you can make financially.
If I could make a suggestion to those of you looking to purchase that starter home, don’t. Think about purchasing a duplex instead of the traditional home. We could have purchased a nice duplex for about $175,000 instead of our home for $112,000. It might sound like a lot more money but you live in one side fo the duplex and rent out the other side. Remember I told you our rent would be about the same for a nice apartment as a new home? Same deal here, that duplex was being rented for $1,000 per month I know because that’s where my wife was living before we got married. The payment, tax and insurance on $175,000 loan would have been about $1,200 per month, you can do the math here.
Now, of course there are many risks associated with renting especially if you depend on that income to make your payment so consider this before jumping to purchase the duplex. I’ll write another article soon about all the risks and rewards associated with renting.