How To Buy A Home If You’re Under 25
Buying a home in 2022 can get pricey, especially if you’re buying in Bellevue, WA or the surrounding Seattle Metro Area where the median price point is over $900,000 for a detached single family home. The media would have you believe that buying a home is nearly impossible if you’re a Millennial or a Gen Z under the age of 25. Well, they’d be wrong. If this sounds like you, I put together a quick guide below with some of the top home buying tips if you can’t qualify for what you want on your own.
Time In The Market
Firstly, it is important to understand that real estate is all about your time in the market, not timing the market like a day trader. If you’re into the stock market, it’s the principle of dollar cost averaging. In Bellevue, WA and the surrounding Seattle Metro Area we are coming out of THE hottest market the area has ever seen with nearly 60% appreciation in home values for the previous two years. No matter how you slice it, that is unsustainable. SInce the market peaked in March/April of 2022, home values in the area have lost 16-25% as I’m writing this in November. Depending on your beliefs, we may see prices continue to fall, or maybe they’ll be neutral for all of 2023. It is this example of the previous two years that is the reason you will most likely lose money speculating on real estate. Even the biggest home builders in the area have lost their shirts before betting that the market will go one way or the other so what makes you think you can do better than them? Can you make money speculating on real estate? Absolutely! But if you don’t know what you’re doing you could lose hundreds of thousands of dollars in the process.
Buy Under Market Value
Talk to any seasoned investor and you’ll soon find that a “good investment” in real estate is all about the acquisition and how much you buy it for. So, how do you buy a home under market value? One of the best ways is to network with friends and family to see if they know of someone that may be considering the prospect of selling their home and asking them if they would sell it to you for a fair price directly, off the market. Another way is to drive around neighborhoods you like and look for homes with deferred maintenance that you can force value on. Signs that a home has deferred maintenance are: overgrown lawns and landscaping, things growing in the gutters and on the roof, aluminum foil or sheets in the windows, peeling paint, broken down cars parked in the driveway or yard, are you starting to get the idea? These are signs that whoever owns the house no longer has the ability or desire to keep up the maintenance for one reason or another—they are experiencing some sort of distress. These are perfect opportunities for you to contact the owner by mailing them a letter or knocking on their door to find out what’s going on and see if they’d consider selling the home to you. Keep in mind, sellers will usually make the most money by marketing their home for sale on the open market so the motivation to sell to you off the market has to be there.
House Hack
This is by no means a new concept, but it is gaining popularity as homes become less affordable. If you can’t qualify for a mortgage on your own and you don’t mind living with other people you should consider house hacking. There are several ways to accomplish this. One, you and your friends all apply for a mortgage loan together that way all of your debt-to-income ratios combined will allow to you qualify for a mortgage high enough to buy a 3-4 bedroom single family home in your desired area. The second way is to apply for the mortgage yourself and execute lease agreements with your buddies. The lease agreements can begin after closing, they just need to be signed and in place before closing. The lender will usually consider 70-75% of the income that will be generated from the lease agreements towards your debt to income ratio so you can qualify for more home than you would be able to otherwise. It is recommended that you have a real estate lawyer draft an agreement that everyone who has ownership will sign which will define what happens if someone moves out, wants to sell their interest, etc.
IF YOU WANT TO EXPLORE ALL OF YOUR OPTIONS FOR BUYING A HOME IN BELLEVUE, WA AND THE SURROUNDING SEATTLE METRO AREA FILL OUT THE FORM OR GIVE US A CALL AT 206-202-6008.
