Climbing up the property ladder requires getting on that first rung. Unless you are a real estate superstar, you are not going to leap and catch the top rung on your first try. You are going to have to start at the bottom of the ladder and climb your way up. That’s how this works.
In light of that, it is okay for your starter home to look nothing like your eventual dream home. There is nothing wrong with buying something you can manage to make work until you’re ready to upgrade. In short, it is okay for your starter home to be ‘just okay’.
1. You Won’t Be There Long
There is no hard and fast rule about how long you should stay in a starter home. According to CityHome Collective, a real estate brokerage in Salt Lake City, UT, the general rule of thumb is to not buy a home unless you plan to be there at least five years.
Note that five years isn’t as long as it sounds. It may seem like an eternity if you have always rented, but any homeowner can tell you that five years passes quickly when you are looking to move up the property ladder. You might barely have time to get in and finish all the remodeling projects before it’s time to sell again.
2. Building Equity Takes Time
The key to gradually moving up the property ladder is to build equity with each home you buy. Equity is the difference between what you owe on your mortgage and the market value of your home. It is important because equity is that which makes it possible to afford gradually more pricey homes as you move up the ladder.
With a starter home, you probably don’t have a lot of money for a down payment. Mortgage lenders expect that. But if you make all of your payments on time for five years and combine them with a moderate investment in home improvements, you can increase your equity fairly quickly. Then you just lather, rinse, repeat.
3. You Need Time to Figure Out What You Want
Starter homes represent a fantastic opportunity that far too many people miss. What is that opportunity? The chance to figure out what you really want. It’s one thing to dream of the perfect house before you make your first purchase. It is another thing to actually be a homeowner for five or six years.
Your starter home may change your mind about wanting ten acres of land. Living in that first home might make it clear that you want separate bedrooms for all the kids. The learning possibilities are endless. The point is that going from apartment to home ownership and knowing exactly what you want on that first purchase is nearly impossible. Most people don’t get their dream homes on the first try.
4. You Need Time to Figure out the Money Aspect
Finally, there is more to the financial aspects of owning a home than paying your monthly mortgage. You will also be spending on property taxes, homeowners’ insurance, routine maintenance, and non-routine repairs.
It can take new homeowners a couple of years to fully get a handle on home ownership financials. A less expensive starter home gives you the opportunity to learn without pushing your budget to the breaking point.
Do not underestimate the benefits of buying a starter home. If you are anticipating owning your dream home at some point in your life, don’t shoot for it right away. Begin with a starter home and work your way up. You’ll be glad you did.