How many homes should a person own during their lifetime?
It used to be that a person would be born, live, die and pass along a home to their children. That is not the case anymore. Now days a person should carefully plan in advance their lifelong home buying strategy. The best way to do this is to plan on buying 3 homes in your lifetime.
First Home:
You should plan on buying your first home before the age of 27. This will be considered your starter home. This is the home you buy after you settle into your career. You are a few years out of college, have been working in your first job for a few years. Hopefully you have been able to build a rock solid credit score and save enough for a down payment. You should consider buying a home that has great potential to build equity that you can use to buy your second home.
Second Home:
After living in your first home for about 5 or 6 years, you might be married and ready to start a family. Your starter home might not be large enough for you and your clan. Now is the time to start planning your next purchase. Hopefully you have been able to advance in your career, save some more money and have a credit score that banks consider GOLDEN. You also should have built equity in your home which once sold you can use to have a down payment towards your second home. Speak to your Realtor on the best way to sell and buy a home with minimal gap of time in between. Also try an anticipate the type of home you would want to spend the next 30 years of your life in. This is key because you will want to have a home to raise 2-3 kids and it will take about 30 years for all of them to be out of the house if you space out the births of your kids.
Third Home:
Your kids have all moved out and you are ready to retire. You want to travel the world and spend less time maintaining your home. You have finally paid off your home and the equity build up over the years has made you a MINT. You have money saved up, an 800+ credit score and are now in the position to buy a home that should theoretically be less than the value of your second home since you will be down sizing. Again talk to your Realtor about your best strategy. Ideally you buy a home that meets your comfort level without being to large to maintain. Condos and Coops are a great option at this point. You will also want to speak to your bank and purchase your next home with a 15 year fixed rate mortgage. Since most people live to around 80 or above, this will ensure that you can pay off your mortgage before you pass and can leave the home to your kids. You should also have a life insurance policy to pay any estate tax that might apply.
Conclusion:
Of course this sounds extremely simple. Most things do seem simple and life tends to throw curve balls. This is just a basic guide and everyone's situation is different. Considering that we all go through different stages in our lives it only makes sense to match our Real Estate purchases to our current lifestyle. You should consider making some key friends to keep close as your personal advisors. These people should be a Realtor, Banker, CPA and a Lawyer. Having a team like this will help you along your way to having a smooth financial life.
Thank you for reading this blog post. Please share your thoughts on this topic.
Joel Rivera
Founder of BronxPad a Bronx Real Estate website.
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