I hate spending money. It actually upsets my stomach when I think about making a big purchase. I’ll spend weeks thinking about spending $50 or $100 on an item that would be nice to have but is not necessarily a must have.
So you can imagine how difficult it is for me when I go house shopping.
The first time I bought a house, I set a budget of $100K. My absolute minimum requirements were: decent neighborhood, not too run down, 3BR, 1.5 baths and no steep driveway that I had to shovel out in the the winter.
As often happens when house shopping, my budget was too low.
We bought this house for $135K. I almost choked when I signed the papers for a mortgage that high.
- 3 BR – check
- 1 Bath – missed the mark
- Driveway so steep it had steps in the middle of it!
It was actually a well built house, on a beautiful street in a quiet neighborhood. Shoveling snow from the driveway in winter did suck as bad as I had anticipated and we could have used an extra bathroom. But all in all, it was a good place to live.
Since buying our first house in 1998, we’ve relocated 7 more times and bought/sold 5 other houses.
Here are some lessons I’ve learned:
It’s good to be in the starter home price range. Every house we bought since the first one was a 3 BR 2 Bath with 1200 to 1800 square feet between 25 and 100 years old. Prices varied between $200-$325k with the average right around $250K. All of our homes sold within 1-3 months on the market.
School district might not be so important. Every realtor and buying guide advises that good school districts are critical- especially for resale value. But neither us nor anyone who bought our homes had kids in school. We were all empty nesters, retirees or couples with no children.
We never recouped the money we spent on renovations or maintenance. That custom picket fence, the new windows we installed, the hardwood floors, and the new AC were all thoroughly enjoyed by the next family who owned our home at a fraction of the price for what we paid for them.
That said, several improvements made our lives much better. Replacing carpet with tile and wood was a no brainer for our messy, animal filled houses. We have never regretted replacing windows that wouldn’t open and keep out drafts.
- Low cost, DIY improvements can make life a lot better. I always replace locks with keyless deadbolts, put lever handles on every door and install ceiling fans in the bedrooms rooms.
- Paint the interior before moving in! A fresh coat of paint transforms the house. We only painted after moving in once and it sucked big time.
- Get a plumber to knock out all minor repairs soon after move in. There’s almost always a few leaks in the kitchen, bath or laundry hookups. I have the plumber replace any frozen shutoff valves in the kitchen and bathrooms. If I’m replacing faucets and toilets, he does those too.
- Remake an old bathroom for under $300 by painting, replacing the sink, toilet and faucets. Skip the fancy $5K-$10K bathroom remodel.
- Avoid a kitchen renovation too. Every kitchen I’ve had was perfectly fine with laminate counters and old cabinets. Paint the cabinets, install new handles and if you need to, put in a new sink and faucet. That’s another $300 makeover. (I only replace appliances when the old ones break down beyond reasonable repair.)
- Never, ever build an addition. Just sell the house and move somewhere else if you need more space. I cannot imagine the cost and aggravation could possibly be worth it. Most likely, you can get rid of a bunch of crap instead and find that you have plenty of space.
- Plant some flowers, bushes and trees. They can transform your yard into an oasis for under $200.
Having bought and sold my “dream house” a couple of times, I now know that home is where my wife and I live. The house doesn’t matter nearly as much as I used to think. With our basics covered, we can make just about anything work.
Here is my #1 home buying tip if you want to retire early – Buy less house than anyone tells you that you can afford.
Realtors and mortgage brokers are biased. The more you pay, the more commission they make. My experience is they have always pushed me to move “upmarket”.
The media and Federal Government (Fannie Mae, Freddie Mac, VA, FHA) will all encourage you to spend up to 33% or even 45% of your pretax income on a mortgage!
That is crazy – over 50% of your working hours will be dedicated to paying for your house!
Instead buy a cheaper house so your mortgage + property tax + insurance is less than 25% of your monthly take home pay.
I have done it both ways.
When my mortgage required half my paycheck, I had financial pressure all the time. Credit card debt kept increasing. Any small setback, like a car needing new brakes, something needing repaired in the house or a low commissions that month caused us lots of problems.
Later in life, when I was earning more and managing my money better we bought less house than we could afford. We had a small mortgage that was <25% of my take home pay. We were able to payoff our credit cards, payoff our cars and even put money into retirement funds. We built a nice savings cushion and even eventually paid off our mortgage early.
When your mortgage is this low, it gives you breathing room in case you lose your job, have an unexpected expense or just need to put more money into savings. For me, this removed loads of financial stress and gave my family the freedom to switch jobs, relocate cities and eventually leave fulltime work.
To buy less house means you’ve got to resist the pressure to “keep up” with everyone else – on social media, on TV, at work, and with friends.
This can be hard for many people. It was even hard for us at times (harder for my wife than me).
It means no 4000 square foot McMansion with 5 bedrooms and 4 baths. It means you won’t have granite countertops and frameless showers. You might even have to get rid of some of your excess crap instead of storing it in your massive 3 car garage.
But today, I’m grateful to be semi-retired and living in an average house, on a beautiful street, in a quiet neighborhood. And since we were able to relocate to Florida I don’t ever have to worry about shoveling snow again.
