4 Mistakes To Avoid To Profit From Your First Home
Stepping onto the property ladder can be a nerve-wracking experience. And for good reason; a house is likely to be the single biggest purchase of your life.
It may have taken years to save the deposit, and you don’t want to make a mistake.
And then there’s the endless weekend viewings, competition with other buyers and the uncertainty over your offers.
Understandably, emotions are riding high. But don’t fling all logic out the window.
If you learn how to make money buying your first house, you’ll be able to profit from it in the future.
To help keep you level-headed, here are four first home buyer mistakes to avoid.
1. Getting Emotionally Attached
It’s hard not to fall in love with your first home. After all, this is your own little space to do as you wish.
BUT… don’t get emotionally attached to any house before it’s yours. It will cloud your judgement, and you’ll end up paying way over the odds for it.
Try not to be wowed by tasteful décor, new carpets or a beautiful kitchen. You can redecorate any home to match your style.
Look past the décor to the bones of the property – do your due diligence on the stuff that is expensive to replace:
Is the roof in good order? When was the boiler and heating system installed? Are there going to be any other large costs soon like upgrading the windows?
How old is the property? Older homes will have more maintenance costs.
Will the layout work for you? Is there enough space if you intend to start a family?
Try to remain as unattached as possible during the buying process. Objectively assess the quality of any potential house just as you would when buying jeans, shoes or any other product.
2. Buying At Full Market Value
“You make your money when you buy.”
Heard that one before?
This well-known phrase is true whether you’re buying shares, a business or your first home.
And although your own home isn’t technically an investment – as it costs you to live there and doesn’t produce an income – you should still shop for it like you would other investments.
That means having strict buying criteria for how much you’re willing to pay and the level of discount you’re looking for.
If you pay market value or above, then you’ll have to wait for the market to rise before you can profit from your home. And if you’re forced to sell soon after buying or when there’s a downturn in the market, you could end up losing money (especially after accounting for selling costs).
Don’t rely on capital growth – which is never guaranteed – to lift the value of your home. Lock in profits from day one by buying at a discount, even if it’s just 5%.
3. No Value Adding Opportunities
Adding value “forces” the market price of your property up without having to wait for capital growth.
What do I mean by adding value?
Adding value is any work you can do to increase the value of the property. This could be anything from light, cosmetic refurbishments such as painting and decorating or replacing an old kitchen, to major renovations like adding a bedroom or extending the footprint of the building.
There’s also the potential to increase the value by title splitting a block of flats or large property, or converting a house into a HMO (house of multiple occupation) that’s able to earn significantly more in rental income.
Spotting add value opportunities requires a creative eye and knowledge of what to look for.
You have to look past the ugly to what could be. Hideous wallpaper, nicotine-stained ceilings and worn-out carpets will put many buyers off, but it’s a sign of a potential bargain for the astute home buyer.
Quick Word On Renovations
Cosmetic renovations (painting, new fixtures, replacing kitchen/bathroom) are the easiest way of adding value. Most light refurbs don’t require a tradesperson, and you can save money by doing the work yourself.
Be careful not to get carried away and overspend. Your goal should be to add at least £3 of value for every £1 spent, i.e. a £10,000 renovation should increase the property value by £30,000.
4. Allowing Other People To Influence Your Decision
If you’ve never done something before, it makes sense to seek advice. But when it comes to property, be wary of the advice giver. It’s one area where everyone is an expert or at least has an opinion.
Some people may not have your best interests at heart. Estate agents, for example, work for the seller and will try to influence you to put in your highest possible offer.
They may pressure you into making a high offer by saying that there’s a lot of interest in the property, or they expect the winning offer will be well above the home report value.
Or it could be a know-it-all family member that ends up talking you out of a doer-upper that would have been a killer deal because they can’t see past the garish 70’s décor.
Unless someone has achieved results that you desire, you should be wary of following their advice.
Wrapping It Up
Becoming a homeowner is a significant life event that should be celebrated. But to ensure you’re celebrating and not filled with buyer’s remorse, you need to keep your business hat on throughout the home buying process.
Take the emotion out of it and only put in offers that make financial sense.
Be smart, and don’t miss the opportunity to make a significant profit from your home when you eventually sell it.
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Hi! I'm Jamie
I’m a 30-something money blogger that writes about saving, frugal living, investing and entrepreneurship.
I achieved financial independence at 30 through hard work, saving and learning to invest.
On this blog, I share everything I've learned about money to help you build a life you love, free from money worries.
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