We’ve been discussing real estate in great detail around here. You know what to do before you apply for a mortgage or why young people are clueless about real estate. Today we’re going to go in a bit of a different direction. I wanted to get into the actual money spent on a place to live in.

One area of buying a home that we haven’t gone into yet is the actual price of a decent property. How much would you spend on a place? This includes the final price of the home on the closing date, not your actual down-payment or what the value can change to over the years.

Former UFC fighter Chuck Liddell threw down some serious money to buy a home. Liddell bought himself a 6,000 sq ft mansion for $2.6 million. Would you like to have 5 bathrooms and live close to Kim Kardashian? I would answer yes to one of those (won’t say which one).

For me spending money on a place should depend solely on your current income and not what you plan on making in the future. There’s really no guarantee that you’ll have a job tomorrow, let alone a job making more money than ever before. It’s dangerous to expect your income to increase drastically in the future while buying a home because you don’t want to get too much house or to be stuck in a place that you can’t afford. It’s tough to accept in your 20s that you’re not going to become a millionaire anytime soon. However, you need to be realistic when considering your future income because you don’t want to be stuck with insane mortgage payments. You’d have to say goodbye to those annual trips.

On another note, everyone is different when it comes to buying a place and the amount of money spent on a home. Some of us will want to spend all of our savings on the dream home. Others will want to spend as little as possible on a home so that they can continue their lifestyle. This is why I had so much fun writing the real estate debate that you need to join piece a few weeks ago. We’re all totally different when it comes to buying a place and we’re all willing to spend different amounts of our income on a home.

We all also have different plans when it comes to location. One person is willing to pay significantly more to live downtown, while the next person wants to live in the country side and pay less money to enjoy a more peaceful lifestyle. On that note, the person living downtown wants to walk to work and have a upbeat city lifestyle. The person in the rural area wants to settle down and doesn’t mind driving a little bit to get into work every day.

How much are you going to spend on your first home purchase? If you’re already a property owner, how much did you spend on your first home purchase?

Is buying a home the best decision that you can make with your money in your 20s? Not totally. However, I wanted to look at the positive side of purchasing a piece of property after college. I’ve been open minded about discussing renting compared to buying a home in your 20s. It’s time to lean towards the ownership side of the argument.

What are the benefits of buying a home in your 20s?

You settle down.

Buying a place is great when you want to settle down. When you compare renting vs buying a home, you need to look at your situation in life. As a student or a young person that wants to explore, it always makes more sense to rent a place. As someone looking to settle down, the best move could be to buy your own home.

We all go on our own unique journey in our 20s. Some of us will want to explore the world. I personally took some time to travel the world for a bit. Others have no interest for this. I have many peers from school that just wanted to find a job and get married after college. That’s cool.

By buying your own home in your 20s you can settle down with your career and your location. You can focus on building a successful marriage or a family. You’ll have a stable place to call home.

Whether you want to settle down or not, the next point is an important one…

Buying a home is motivation for more.

One of my friends just moved into his new place a few weeks ago. He shared something interesting with me. We were chatting about random topics and he mentioned how he never really had any motivation to save money until he got the idea to buy a home. Now that he has a home he wants more. He finally sees tangible results for all of his hard work. He’s now motivated for more. What’s next? Perhaps a cottage or a rental property for him.

For many of us, buying a property will motivate us to work harder and demand more results in other areas. Once you have your own place you’re going to want more out of life in general.

Buying real estate can be a forced savings tool.

Don’t scrutinize me just yet because I’ve laughed at this point in the past myself. While I do understand that buying a home isn’t the best way to force yourself to save money. The problem is that personal finance isn’t a logical process. We all act on emotion. None of us are rational when it comes to spending money. You don’t believe me? Look around your room right now. Do you have brand name clothing? Do you have 4 video game systems sitting on the floor? What I’m getting at is we all need motivation and incentives to save money. Buying a home can be that incentive for you. Buying my condo at a young age forced me to work harder and save more money. Otherwise I wouldn’t have taken my finances seriously or even started this personal finance blog.

The other aspect of saving money with a home comes down to getting prepared to apply for a mortgage. This is going to force you to save up money, increase your income, and ensure that your credit score is where you want it to be. Sometimes all we need is a goal and a reason to save money.

At the end of the day, real estate isn’t the best investment. Buying a property also isn’t the worst investment either. The thing is that real estate comes down to your unique situation financially and emotionally. There’s no one-size-fits-all sort of answer here. What you decide to do should be based on your situation and your goals.

Will you benefit from buying a home? You tell me…

Many of you reading this are considering buying a home. You’ve been saving up money, looking around, asking friends for advice, and now you’re ready to make the big move. Congratulations to you.

Then there are those in a different situation. Those that haven’t put much thought into real estate. They figured it’s the next logical step when debating what to do after college. Without putting in the proper research and time, things can get pretty sour with your first home purchase. Buying your first home can actually go horribly wrong in your 20s.

How can things go wrong once you get the keys to the place?

You’ll be spending more money than ever before.

The bills and expenses will add up like crazy when you get those keys. The closing costs alone will be more than enough to put some of us into debt. The costs associated with home ownership can become pretty astronomical for the young professional just getting started in their respective field.

Naturally, at this point you’re likely debating a few common points in your head:

Why’s there such a shock when it comes to your first home purchase?

Wouldn’t we just budget for this increase in spending?

That’s the problem. We all assume rational decision making when it comes to personal finance. That’s just not how we work. The way that you end up in this situation is by not challenging conventional wisdom and doing what you’re told is the next thing to do.

Despite attempting to save money for your new home and budget your income for your new expenses, there are many hidden costs that can creep up on you. Let me throw out a few examples:

It’s the long weekend and you want to have your buddies over. You realize that you need a new BBQ for the food. You need to grab some beers. You need to purchase the food. You need propane. You find yourself spending a few hundred dollars on an afternoon in the backyard. In my opinion an expense like this is worth every penny because I enjoy beers and food with friends. However, it’s still an expense.

Then there’s the major issues that can pop up.

The first brutal winter snow storm hits and your furnace breaks down. That could be thousands of dollars, but I don’t want to get too extreme with my examples. What if you need a new snow blower? A new shovel? Are you now going to wake up an hour early to shovel the snow? I just wanted to throw out a few common scenarios so that you’re prepared for the inevitable.

What’s wrong with spending more money than ever before? You’ll kill your savings, possibly go into debt, spend time on random activities, and regret ever moving out. I’m just trying to warn you.

Your whole mindset can change.

When you have a home mortgage you can’t have the same lifestyle as you once did. You no longer live with your parents or rent a place out. You can’t just get up and leave. You can’t randomly go to Cancun with your buddies next month. You can’t just quit your day job to start a personal finance blog (who would do that?). You can’t blow money on a random new toy.

Where am I going with this? Real estate can go horribly wrong in your 20s when your mindset changes and you realize that you no longer want to be stuck with a home mortgage. How will you deal with this?

That’s how buying a home can go wrong in your 20s. I’m not here to scare you. I just want to give you fair warning. The good news is that you read blogs like this one and you’re ahead of the game. For more information, grab a copy of my real estate guide.

Do you know what to do for your very first time as a home buyer?

After thinking about it for a long period of time and debating if it’s better to buy or rent a home, you’ve decided that it’s time to apply for a mortgage. You’re ready to move out and get your place. You have a job close by, you plan on staying in the area for a long time, and you’re ready too settle down. You believe that buying a home is the right move for you right now.

What’s next? What do you have to worry about when looking in your first home mortgage? That’s exactly what I’m going to outline for you today.

What do you need to know before you apply for your first mortgage?

Your credit score must be where you want it to be.

Have you closed any accounts recently? Have you been late on any payments? Have you just not built enough of a credit history?

The truth is that you need to fix your credit score before you apply for a mortgage if you want to get approved at a decent rate. If you’ve been reading this site then you know how important a good credit score number is. All I’m going to say here is that it’s okay to few a few months or even a year until you improve your credit score. There’s no sense in rushing into a home purchase where you’re stuck with a high interest rate due to your lame credit score.

You should have money saved up.

Not only should you obviously have money saved up for the down payment, but you should have some extra savings. The lender doesn’t want you blowing all of your money on just the down payment. They want to know that you have some extra savings just in case.

What if you lose your job? What if you get sick? The lender wants to know that you have savings to protect yourself and so that they’ll get their money back that they loaned you. This is why it’s important that you run all of the costs associated with buying a home.

What are some of these home ownership costs?

• Moving.
• Maintenance.
• New supplies for the house.
• Increased consumption.
• Property taxes.
• Closing fees.
• And so on…

You can learn more by grabbing my real estate eBook that answers all of your questions.

You should be able to prove your income.

Any reputable lender will be hesitant to loan you any money if you can’t prove your income and that you actually have money coming in. I’ve heard stories from readers where they had to prove two year’s worth of income. I’m not sure that it’s always going to be this extreme, but you should be prepared to prove you have money coming in.

This is critical because the lender wants to know that you actually make money to cover your mortgage payments. How will you make your payments if you can’t prove that you have a steady income?

Are you ready to apply for that home mortgage loan? Do you have everything in order?

I’ve noticed over the years that young people are pretty clueless about real estate.

We just assume that the best investment is real estate. We believe that you need to buy a place after college. Nobody ever really challenges this. Our parents tell us that we have to go to college after high school because it’s the “smart” thing to do. We go to college because we don’t want to to disappoint our parents. Then the next logical thing to do is to find a good job. Once you find a good job, it’s time to find a partner and/or buy a home. Why? Because it’s what we have to do. It’s what we’re supposed to do.

Young people are clueless about real estate.

Why do you have to buy real estate in your 20s?

I always assumed that it just made sense to buy a place in your 20s. Just like you I never really challenged this piece of conventional wisdom. It’s just what we’re told to do.

Why buy a place first? Why not rent and get to know the area? You’re not “throwing money away” by paying for rent. You’re paying for a roof over your head. You have the freedom to get up and leave when your lease expires. You don’t have to worry about putting the place on the market.

While it feels great to boast to your friends about your new home purchase, the truth is that your new home will change your lifestyle forever. You’re now committed to making those monthly payments. You have to pay your mortgage. If you stop paying your mortgage, you’ll lose your home and your credit will be in the toilet. It’ll take you a long time to improve your credit score after this.

This means that you can’t start an online business or pick up to travel because of your new home-owner lifestyle. Do you want to restrict yourself like that?

What are other options in your 20s?

I recently wrote about your living situation after college and I highlighted the many options. There are plenty of options for your housing in your 20s. You can’t just assume that you have to buy a property. You need to weigh the other options. Perhaps you could rent a place out while you work on your entrepreneurial projects? You might want to to travel in the near future? You might just not be ready to buy a place yet.

Now don’t get me wrong, the young professional couple with a beefed up savings account looking to settle down might be ready to buy a place. You do what feels right for your unique situation. Don’t let any “expert” tell you what to do.

Are you clueless when it comes to real estate?

If you are then just leave a comment below. I’l try to answer it as best as I can. I’m here for you after all. If I can’t answer it, I can always delete the question (kidding!).

You’re about to apply for your first home rental. You’re ready to apply for a mortgage. You’re ready to move out of your parents place and move into that new place. You’re ready for freedom. You’re ready to rent that apartment by the beach. You’re ready for some changes.

Then thee lender runs your credit check to see what your credit score is like. It turns out that your credit score isn’t too impressive due to a few mistakes that you made in your 20s. You may forgotten to pay back a balance or you just haven’t really established credit. Your credit score doesn’t impress the lender.

Why’s your credit score so important? You need to read my piece on what a good credit score number is all about. Your credit score basically shows how reliable you are with paying back money based on your past financial history. It’s the only tangible proof that some lenders will have.

Are you totally screwed over with a poor credit score? I decided to ask a buddy that works in a bank and deals with mortgages to see if there’s anything that you could do with a poor credit score.

Will a poor credit score always hold you back?

The truth is that at a young age you’re hands are tied when you have a poor credit score. The lender (home or car financing) will be hesitant to loan you the money based on your credit score. If they do loan you the money, they’ll ensure that they charge you an arm and a leg on the interest rate. Either way, it doesn’t look so good with a poor credit score.

The good news here is that you can always improve your credit score. This number is not permanent. It can go up after a series of good financial moves.

There are also two other important factors in play when you apply for a rental unit or a home mortgage in your 20s.

Your savings and income are both very important.

Whenever you apply for a rental, a home mortgage, or even car financing, there’s going to be a need to prove your income. Some lenders will ask for a few year’s worth of income proof. The good news here according to my friend is that if you’re a new college graduate with a solid and steady income, it could overcome a poor credit score. Most lenders will realize that you just haven’t had enough time to build up your credit history. You won’t get the best interest rate, but you won’t be totally screwed.

In my personal experience, when I applied for a mortgage they placed a heavy emphasis on my savings. They wanted to know that I had money saved up (and assets) in case I ever lost my job and had to find a way to make my mortgage payments. The lender simply wants to be positive that they’re going to get their money back.

I hope that this article clarifies the importance of a poor credit score and it’s role in your housing situation.

Deciding if you should buy or rent a home is a major decision in your 20s. This one decision alone will determine your finances, flexibility, and lifestyle for the rest of your 20s. The majority of your income will likely be spent on your living situation. How about that for stress?

When I was in Miami last week I took the time to ask some of the locals about the ridiculously nice condos that were located close to South Beach. Not surprisingly, I found out that the beach condos are super expensive. The obvious benefit to buying a condo on South Beach is to enjoy the South Beach lifestyle. The obvious setback is the steep cost of a condo and the other living expenses.. For one person, life’s all about living by the beach. For the next person, renting a place in a small town is the obvious choice.

Do you care where you live? Does it matter to you what your surroundings are? What matters to you when it comes to real estate?

This is the real estate location debate that you need to join. I’m going to throw a few points and questions out to get you thinking.

Is it worth paying more to live in a big city?

The cost of living in a big city (especially close to downtown) is not going to be cheap. The flip side is that the ideal lifestyle for many young professionals involves living downtown, close to everything. You’re going to spend more money to live in the big city, but you’re also going to experience a different type of lifestyle. Let’s look at both sides here…

What are the benefits of living downtown?

• You don’t need a car because you can use public transportation.
• You’re close to everything.
• Better social life.
• Always something to do.

What are the setbacks with living in a big city?

• Expensive cost of living.
• Always a reason to spend money.
• You get to save less of your income.

As you can see, there are many benefits and setbacks to living in a city compared to moving out to a small town. Your real estate decision will  depend on what value you place on this information.

Do you care if you live with your parents?

You can save tons of money by living with your parents for a bit in your 20s. The obvious problem here is that well you’re stuck your parents. This will impact your social life, lifestyle, and your sleep schedule. You can’t really be wandering around the home making noise late at night when your parents have to be up early the next day. However, you can get serious about your finances, work your butt off, save as much money as possible, and then move out on your own terms when you’re ready.

Is it worth sacrificing a few years by staying at home? Should you move out right after college and get your life started?

What sort of lifestyle are you looking for?

To tie in the previous points, you can spend the big bucks to have an amazing lifestyle based on where you live or you can stay with your parents and save money. The type of lifestyle that you’re looking for will influence where you decide to live.

If you want to walk everywhere, it would’t make sense to live in the suburbs.

If you want to live in a big place with a spacious backyard, you’re going to likely have to move to a small town.

If you want to go out every single night, it’s going to be challenging in the suburbs.

The big real estate debate essentially boils down to the location that you want to live in and the amount of your income that you’re willing to spend on your living expenses. For some of us real estate is all about the ideal location, no matter how much of our budget it eats up. For others, a home is just a place to sleep and it makes more sense to find a bigger place out of town.

Now it’s time for you guys to join the real estate debate– Where are you going to live? What do you consider when it comes to where you want to live?

If you decide to buy a place in your 20s, you’re going to have to make sure that you know what you’re getting into. I’ve already stressed what a huge investment buying a home in your 20s. It’s likely going to tie up the majority of your savings and lock you into a certain area for a long period of time. You really need to take this decision seriously and understand what you’re about to get yourself into.

What should you watch out for with your first home purchase?

Don’t skip the home inspection.

You need a home inspection. You want to know what’s happening with this place that you’ve invested most of your savings into (or are considering investing your money into). You also need to know if it’s even worth buying the place at all. You don’t want to move in and then find out that you need a new roof.

Here’s a quick story on the importance of a home inspection:

My buddy Roman just purchased a place. It was an older home and he felt that he definitely needed a home inspection. It turns out that the inspector found out that he needed to make some modifications to the place. Instead of running away from the property, Roman chose to ask for a lower price. He stated his reasoning for the lower price and it was granted. Fortunately, he’s also good with DIY projects and the modifications to the home won’t be a problem for him. I on the other hand would run away form any DIY work.

Do yourself a favor and pay for the home inspection so that you know exactly what you’re investing your money into. The best way to buy a home is to wait until you have everything in order.

Don’t finance too much other stuff at once.

It’s tempting to want to improve your whole life at the same time. When you get a brand new house, you might get sick of that old car that you’ve been driving around since you were a broke college student. You might also want to finance that brand new flat screen.

The problem is that you don’t want to finance too much at once because you’ll tie yourself up to a bunch of stuff. This can also hurt your credit score because you’ll owe more money than ever before.

Avoid too many big changes.

You don’t want to quit your job and start your own business right as you move into your place. If you make too many changes at once, you’ll run the risk of creating far too much stress and anxiety for yourself. You want to have fun and weekend parties in the summer with your new place. You don’t want to lose to your mind from all of the stress.

Don’t assume that you’ll be making more money in the future.

It’s common to assume that you’ll make more money next year and then even more money the year after. You don’t want to be pessimistic and think that you’re going to make less money. There’s just one issue with assuming that your income will increase: you could start to overspend today.

It’s easy to justify purchases today by telling yourself that you’ll be making more money in the future. This is what college students do fairly often. The breakdown occurs when you (and if) you notice that your income is the same, while your expenses have skyrocketed.

Get advice from friends.

If any of your friends have purchased a home recently, you can ask them for advice.They’ll steer you in the right direction and help you make the best decision possible based on knowing your true personality.

That’s what you need to watch out for with your first home purchase. It’s your money and nobody will ever care about your money as much as you do. This is what it’s important that you take your first home purchase seriously. Are you ready to buy that first home?

Renting vs owning is a huge debate when it comes to deciding where to live as a young professional. I had so much interest in the topic that I put together an extensive guide on deciding if you should buy or rent a place. This is also usually the most common topic amongst my friends that are in their mid-20s and working. Everyone wants to move out. It’s just difficult to figure out where to go next.

Why should you rent instead of owning? I’ve covered the idea of renting instead of a owning a home in the past and I wanted to revisit this idea today. As time goes on I continue to do more research and look into more options when it comes to real estate. I’m not a fan of just accepting conventional advice. I love to challenge things and to look for alternatives. I also love to share the results with you guys on here.

Why’s renting a place a better option in your 20s? How can home ownership set you back?

No hidden costs or maintenance fees.

When you rent you pay for your flat monthly fee and that’s all that you usually have to worry about. You might have to pay for hydro or anything else that you choose to have. There are no other hidden costs though. You don’t have to worry about any of the following expenses:

• Condo fees.
• New furnace.
• Property taxes.
• Random repairs.

Even though these fees are usually factored in to the price of rent, there’s nothing hidden from you. You know exactly what you have to pay for every single month. I don’t know about you, but I hate hidden costs.

Flexibility.

When you rent, your emotionally and financially flexible. You may have to wait for your lease to run out, but you can get out pretty easily. When you a buy a home you just can’t get rid of it easily. You have to look around for a real estate agent, have the house appraised, fix it up, make it look nice, and then put it on the market hoping to get the money that you asked for. This whole process can take a long time and it will definitely not be cheap.

As a renter, you can get up and leave to wherever you want to go next. If you want to travel the world, you just wait for your lease to expire and you take off. Your not emotionally or financially tied down to anything.

Improved place.

Renting can allow you to live in a place that you couldn’t normally afford to buy. You can usually afford to rent a much nicer place than you could ever afford to buy. This allows you to enjoy some luxury in your 20s before you settle down and figure out if you really want to buy a place.

Steady budget.

When you rent, you know how much you’re going to be spending on a monthly basis. You can pay yourself first and budget out your money based on this information. You don’t have to worry about anything breaking down in the home, property taxes increasing, or any other random expense that usually happens when you buy a place.

As you can tell from my argument here, it can really benefit you to rent out a place instead of jumping right into home ownership in your 20s. For more information you can grab my real estate guide or email me and I would be glad to help you out.

Graduating from college is an exciting time. You no longer have to worry about finishing up those assignments at the last minute or staying awake through early morning lectures. Now you just have one minor issue to solve as a college graduate.

When you’re done with school you’re going to have to figure out where you’re going to live. You completed one major milestone in life and now it’s time to move forward. You just need a roof over your head.

What’s your living situation going to be like after college? Have you thought about your plans for where you’re going to live?

What are your options for your living situation after college?

You can stay in the college town.

When deciding on what to do after college, you can always choose to stay around. If you really enjoyed life in the college town, you can stay behind. You had four years to get to know the city and build connections. Chances are pretty good that you can find a gig after college because of knowing the town and where to look for work.

You’ll also likely have many friends in the town and know your way around the area. You can take the semester or even the full year to continue living like a student while you work and save money. There’s no need to indulge in lifestyle inflation right after school. You can get into the habit of paying yourself first and living on a student’s budget while you save up for future expenses.

You move back with your parents.

This is a common option because most college students are going to have massive amounts of student debt to deal with. When you move back home you can save money while paying little to no rent at all. These savings can help you deal with your student loans, start an online business, and save up money for a future down payment.

There are of course a few issues with this option for deciding on where to live after college. Moving back with your parents will be a nice slap in the face of reality because no 20-something wants to live with their parents. Your careless lifestyle that you had in college will also have to judge because well you can’t be bringing back girlfriends or buddies to your parent’s place after a night out.

I’m in this situation at the moment. I rented out my condo to increase my cash flow and to travel more. I love the flexibility of being able to travel whenever I want to. I’m just stuck spending more time at home.

You rent a place out.

You can always choose to rent out a place in your hometown. If you don’t want to move back due to a stained relationship with your parents or because you want your freedom, it makes sense to rent a property.

This might be more expensive, but you can consider a few of the following options:

• Stay with your current roommates.
• Find a buddy to move out with.

You’ll have much more flexibility with rent. You’ll also enjoy the freedom that you so badly want in your 20s.

You buy your own place.

If you saved up money in college or lived at home as student, you can consider buying real estate shortly after you’re done with college.

If you’re fortunate enough, you can ask your parents for help. I have a friends that did this. They received help with their parents to get started with life after school.

The main issue is that most college graduates simply won’t be ready financially and emotionally when it comes to buying a home so soon.

You travel.

Traveling is a common option after college because it’s a great buffer before you start a real job. Instead of settling down, you can take some time to see what this world has to offer. I’m a strong supporter of traveling the world because it’s one of the most eye opening things that you can do in your 20s.

Those are the options for your living situation after college. You don’t have to just focus on one option. You can try out a few of these options until you find one that works for you.

What’s your living situation going to be like after college?