It’s time that you leave your parents home and start your own life. You have managed to save up what you feel is enough money to purchase real estate so that you will avoid paying rent. Whether it is better for you to rent or own that is a calculation that you must conduct on your own. Real estate could be the greatest investment you ever make or it could end up with you being broke and losing all the money you worked so hard for.
When investing in real estate avoid these typical mistakes at all costs:
1. Not enough research. There is much that you need to look into before you purchase property that it may seem like information overload. Take it one step at a time and look into all the different aspects; location, the work needed on the home, any legal restrictions, etc.
2. Not factoring in all of the costs. You may find an ideal property at a affordable price but don’t fool yourself you will need so much more money to spend on other real estate costs. You must factor in realtor fees, home & mortgage insurance, land transfer tax, property tax, and the list goes on depending on where you live.
3. You don’t earn enough money. You may have saved up a decent amount of money but working an entry level job and paying down a mortgage may not be the most ideal situation for a 20 something.
4. Too small of a downpayment. Do you want to spend your whole life paying off your mortgage? If you don’t want that to happen then make sure you put down enough money to be comfortable with the monthly mortgage payments and interest costs. Also if you don’t put down enough money you may need to purchase mortgage insurance.
5. Not considering unforeseeable circumstances. Are you working as a financial advisor durign a recession? Or maybe you’re a freelance worker that goes through boom and bust periods. Hope for the best but plan for the worst. If you are worried about losing your job or nervous about economic turbulance then maybe a mortgage isn’t right for you.
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Another real estate mistake for young folk: Too much house.
If you spend most of your income on the mortgage and utilities, you might miss out on the better part of your 20’s. Make sure you have enough money left over to go out with friends, travel and really enjoy yourself. I am a proponent of doing all of those things frugally however.
@Steve I agree with you in the sense that a mortgage may leave you with very little wiggle room when it comes to your finances. If a large percentage of your income is going towards your mortgage payment then that leaves very little room for money to spend on the things that make life fun when you’re young.
I comment rarely on blogs but just wanted to stop and say Great Content.