To Buy or Not To Buy: Here's What To Do
A: On a positive note the Live Chat feature seems to be working as I'm meeting a lot of new people presenting me with very interesting questions. One question that I'm asked almost on a daily basis these days is, "...I was thinking of submitting a bid but I'm not sure if I should buy now or wait a bit?". So, I'll try to sum up the answer to this question so that it conforms to a variety of financial situations.
My soon to become favored real estate mantra: MAKING THE DECISION TO BUY NOW SHOULD BE CLEARED UP BY ANALYZING YOUR CURRENT & FUTURE FINANCIAL SITUATION, YOUR PLANNED TIMELINE TO OWN, AND YOUR ABILITY TO FIND VALUE & HAPPINESS!
Lets anaylze this one at a time in YES/NO format and make a game out of this.
CURRENT & FUTURE FINANCIAL SITUATION
1. Is your job secure?
2. Will your TOTAL monthly housing payments be LESS THAN 1/3 of your current salary?
3. Do you have 6 months worth of TOTAL MONTHLY EXPENSES (Housing + Living costs) in liquid assets AFTER closing? *Note you might need more if you are buying a co-op.
4. Do you have a decent credit score?
5. Are rental prices rising and pricey in your target market?
IF YOU ANSWERED "YES" TO ALL 5 OF THESE QUESTIONS, THEN MOVE ONTO THE NEXT QUESTION
TIMELINE TO OWN
1. Do you plan on living/renting this property for at least the next 3-4 years?
IF YOU ANSWERED "YES" TO THIS QUESTION, THEN MOVE ONTO THE NEXT SET OF QUESTIONS
VALUE & HAPPINESS
1. Did you look at more than 5 apartments in your target price range? Have you educated yourself on your target housing market?
2. Do you have an idea of what possible houses/apartments are going for in your target market?
3. Did you find a house/apartment that satisfies your basic needs?
4. Can you picture yourself living in this new house/apartment for at least the next 3-4 years?
IF YOU ANSWERED "YES" TO ALL 4 OF THESE QUESTIONS, THEN I THINK YOU SHOULD
GO FOR IT & BUY!
However, if you came across a few "NO's" when asking yourself these questions than you need to prioritize what question you answered NO for. For example, if you answered "NO" to RENTS ARE RISING AND ARE PRICEY in your target market than you need to weigh that as a deal-breaker or deal-maker should you find a great home to buy. I do not think this would be a deal-breaker if a good buying opportunity presented itself.
If you answered "NO" to DO YOU HAVE AN IDEA OF PRICING FOR YOUR TARGET MARKET than you should continue to educate yourself until you do. When you eventually find the right property you can bid for it wisely given current market conditions and available inventory.
Depending on where you live and what your goals are, buying or renting is a decision tailored to each individual/family's need. Ideally, you would like to be building wealth. However, if your not in the right financial situation to start building wealth via real estate, than the whole investment process can backfire and you can be forced to sell at a much lower price!
BE SMART...THINK FUTURE..& RAISE YOUR CREDIT SCORE BEFORE YOU BUY!
Check out Suze Orman's tips to Paying Off Debt to learn how to prepare yourself for home ownership!
