October 28, 2021

Why You SHOULD NOT Buy A Home

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These are the reasons you should NOT buy real estate:

ONE: If you’re not prepared for the down payment.
That’s because there’s this ONE term that almost no one considers when they buy a home: OPPORTUNITY COST. I would go on a limb and say that almost everyone who REGRETS their home purchase, which is roughly 44% of adults – didn’t do the math, AHEAD OF TIME, to make sure buying a home was really in their best interest…and while there are a LOT of situations where it DOES make sense to buy a home…it doesn’t automatically mean that “buying a home” is the right choice for everybody.

TWO: If you’ve only budgeted for your mortgage payment.
Your mortgage payment only makes up a PORTION of how much that home will ACTUALLY cost you…and THIS is how much you’re REALLY looking at: Your mortgage payment, property taxes, insurance, maintenance costs, and repair costs.

This means, even though you might have a $1500 per month mortgage payment…when you add everything up…you could VERY WELL be approaching a $2500 per month when you take into property taxes, insurance, repairs, and maintenance…and that’s something that HAS to be taken into account, and properly budgeted for…that way, you’re not ever going to be caught off guard when your monthly bills turn out to be more than you expect.

THREE: If you didn’t factor in Transaction Cost.
When you’re buying a home – you’ll have to pay for home inspections, escrow charges, title fees, appraisal fees, and loan origination charges, transfer taxes, notary fees, filing fees, etc.

In addition to that, the transaction costs are MUCH higher when you sell – this is because there’s often real estate agent commissions involved, transfer taxes, escrow charges, more title fees, and more random nonsense that continually adds up. When everything is said and done, selling a home can easily cost you another 4-6% of the homes value from start to finish…meaning, just to BREAK EVEN on the purchase…you need to sell your home about 7% HIGHER, otherwise – you’ll start to pay out pocket for these transactions costs.

FOUR: If you don’t plan to keep it AT LEAST 5-7 years.
That’s because, the shorter you plan to keep your home for – the riskier it is that you’ll make money owning it. Things like transaction costs, property taxes, insurance, maintenance, and repairs are all non-recoupable costs that you will NOT make back…so, you’ll need to expect that property values would continue to rise to offset that expense and make buying “worth it.”

That’s why, GENERALLY…the breakeven point for MOST homeowners is going to be around 5-7 years…and, in almost all situations, the longer you keep your home, the more likely you are to make money.

FIVE: If you don’t keep a 3-6 month safety fund at all times.
Just like “FINANCIAL EXPERTS” always recommend you keep a 3-6 month fund for anything that might come up…I VERY MUCH recommend a “HOME FUND” that covers 3-6 months of your homes bills, repairs, maintenance, and payments – JUST IN CASE something inevitably breaks, a tenant stops paying rent, or there’s just damage beyond your control.

And, listen….I’m not trying to dissuade you from ever buying a property – because long term, in the right circumstances, owning real estate could end up making you a SIGNIFICANT amount of money, and it CAN be one of the best financial choices you make…But, this IS meant to get you thinking about WHY you’re buying a property in the first place, and to REALLY run the numbers before you make such a large purchase – to make sure it’s worth it.

For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com

*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.

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