- For my subscribers that have been here for a minute,
this is a little awkward.
But I'm back because we need to talk
about purchasing a home.
Now, purchasing a home can be an absolute dream come true
or a nightmare.
Now the good news is that it's pretty easy
to avoid the nightmare but the bad news is that most don't.
A survey found that about 51% of millennials
have regrets about buying their home
and I absolutely understand why.
Buying a home should freak you out
more than anything besides having a child
because it's the largest purchase
that you're most likely gonna make in your life.
Just barely ahead of that large student loan bill
from an overpriced college, thanks to the US government.
No, wait, I mean, US citizens,
us guaranteeing those loans.
Being freaked out is a good thing in this case though
because it should make you think twice or even thrice
before going through with the home purchase.
In this video, we're gonna go through
how to turn your home purchase from a big money pit
into a little bitty smaller money pit
and hopefully make the whole experience just
a little bit more pleasant.
If you're someone like me
who's pursuing financial independence or early retirement,
then this is one decision that could make
or break your chances of ever firing
in a reasonable amount of time.
The last thing that I'd want to see
is for you to become a part of that 50%
who regrets ever purchasing a home
because it destroys your financial future.
Hey, I'm Jarrad and on this channel,
we talk about all things personal finance, investing
and of course, wait for it, financial independence.
This probably sounds really bad and could come off
as being a Debbie Downer
but it's something that needs to be said.
When you go through the process of purchasing a home,
everyone you're working with, even if it's your mom
is trying to take advantage
of you in one way or another.
Okay, maybe your mom is not trying to take advantage of you
but who knows, maybe she is.
I'm not gonna go full conspiracy theory on you here
but just a little bit.
Let's think about it logically here though.
The seller of that home just wants to get rid
of the darn thing.
Their real estate agent is trying
to gouge your eyes out with the price that you pay.
And we can't forget about the poor old mortgage company
who wants to offer you as much money
as possible so that you can spend more
than you technically should be.
I remember back when I got pre-approved for a mortgage,
the mortgage company offered me roughly three
and a half times the amount that I actually ended up taking.
I was blown away that they were gonna give me
that much money to buy a home.
I'm looking at my income and I'm looking
at how much they're gonna give me and I'm like,
this doesn't really make sense for someone
who's trying to stay financially stable.
It reminded me of the time that I took out student loans.
It seemed like a bottomless pit of available money
but of course the joke was on me though
because I took a ton of it and had to pay back.
Your real estate agent is about as close
to a quote unquote "friend" as you can get
but they're even trying to get you through the process
as quickly as possible because of course,
the quickly that you buy a home,
the quicker that they can put their time
into the next person that they're trying
to help to find a home.
This isn't necessarily a bad thing
because they'll end up working hard for you
but at the end of the day,
you're just a number to them.
Even if it's your mom.
I'm not saying that you shouldn't trust anyone
but you need to keep your guard up the whole time.
The home purchasing process potentially take a little while,
weeks, months, years.
So it's easy to get careless at times
and gloss over some of those important details.
You are the last line of defense
when it comes to your financial future.
I'm personally anti-suit and I know
that there's gonna be some suit real estate agents out there
with their combines buns and their three piece suits
with their freshly pressed ties and their pocket squares
who were offended by what I just said.
But let's be honest, a random dude on YouTube
isn't gonna bring down the fricking house market.
So settled down suits.
Plus if you're mad about it,
then feel free to send an email to Idon'tcare@gmail.com,
you'll get an answer right away.
But for all of my non-suits out there,
please do me a huge favor and Hulk smash
that thumbs up button because it makes me feel better
about myself on the inside.
Not really but it would still be a pretty neat thing
for you to do.
41% think that their mortgage payments are too high.
Now, not to be a butt head or captain obvious here
but mortgage payments, they don't suddenly change.
They're the same for however long the loan is for
until you change the terms.
I think where the misunderstanding comes from
is when you start to add in things like property taxes,
insurance, rolling closing costs into your mortgage,
utilities, potentially PMI on top of the payments
towards the actual mortgage payment and interest as well.
Things can get out of hand really, really quickly
and start to add up well beyond what you planned for.
The good news is that most of these things
can be looked into before the home purchase.
The only wildcard is utilities really.
And luckily there's a ton of resources out there.
If you just do a quick Google search to see
what the average cost is for these in your particular area.
They're not perfect because a lot of it depends
on the size of your home, where you live
and your consumption but it's at least a start.
PMI is one of the easiest costs to avoid
by putting down no less than 20%
when you purchase the home.
Now 67% of millennials are putting less than 20% down
on their mortgage which attributes
to a higher monthly payment.
If you cannot afford to put down 20%,
then you can not afford a home right now.
And that's okay.
There's this stupid belief that home ownership
is the American dream and how everyone
should purchase one as quickly as possible.
But that's just a bunch of BS and you shouldn't feel bad
if you don't have that kind of money right now
especially depending on where you live.
If you in a state like California
where the average home price is $587,000
and then coming up with $117,000 down payment
is gonna be a little rough.
But on the other hand,
if you live in a place like my home state, Ohio
where the price is $160,000,
then coming up with a $32,000 20% down payment
might be a little bit more attainable.
Home ownership is pushed on people
by the mortgage industry and society
like it's some great achievement
until of course it's not because you're freaking house poor.
The new home feeling will wear off
but those monthly payments will haunt you
and your net worth forever.
- Forever.
- If someone ever tries to make you feel bad
about not being a homeowner,
then politely tell those people to,
no, don't say that.
Tell them to kick rocks instead.
It takes a lot of hard work,
discipline and patience to save up 20% of any large amount.
But I have yet to hear anyone say that improving
in those three areas is a bad thing.
Whether it's new or old homes need a honor of love
on a regular basis or else it's gonna be falling apart.
Now 33% of millennials think that
their house requires too much maintenance.
This is something that's extremely easy to overlook.
If you buy a fixer upper then of course
it's gonna need some work done to it
but that's not including the regular upkeep needed
to keep it from turning into an absolute dump.
Walls are gonna get dinged up,
the outside is gonna get dirty.
The washer and dryer will randomly go out.
That roof costs quite a bit of money to replace
and if you have children or plan to have them in the future,
then those little psychos are gonna tear the thing up.
I was sitting on my back deck a few weeks ago
and the cover of my chimney just flew off my house
on a windy day and over my head into the backyard.
Now this wasn't something that I was expecting
but I had to get replaced of course as soon as possible
because the last thing that I wanted
was to end up with birds or bats
or Battlestar Galactica in my house.
- Bears, beets, Battlestar Galactica.
- As much as my dog would love to chase those suckers
around the house, no thank you.
Sorry, not sorry Molly.
And for all of you, welcome to home ownership
where the most random things happen
when you least expect them.
Unfortunately, with the home,
when things happen like a hot water heater going out,
the problem needs to be attended to very, very quickly.
There's no such thing as quote unquote,
"too much maintenance with a home".
In reality, maintenance it's just maintenance.
Your home might need a little bit more than another
at this point in time and that's just all there is to it.
Everything is going to eventually need
to be replaced in that house
but it's kind of just a matter of when.
Now sometimes multiple things needed all at once
which of course isn't any fun.
So once again, I'm gonna tell you,
welcome to home ownership, proceed with caution.
This is why it's important not to overextend
yourself when determining how much house
you can actually afford.
Now setting money aside every month
for future home repairs is just as important
as making the mortgage payment on time every month.
There's another cost with a home
that not many people talk about
but I think that it's just as important to be aware of.
And that's your time, keeping up on a home
is extremely time-consuming
whether it's scheduling someone to come out
to replace a dishwasher and having to be there
to oversee the installation if they even show up on time,
if they even answer the phone
because those people are very difficult to work with
or the time that you'll spend painting
the walls in the house.
There's a fine line between once and needs
and the lines can get extremely blurred
when it comes to a home that you purchase.
I want to be a Harlem Globetrotter that gets paid in candy.
I need a working furnace in my house because in Ohio,
the temperature can sometimes get down to single digits
in the winter.
Now, 23% of people surveyed said that their home lacks
the features that they need.
I'm not saying that there's anything
wrong with wanting specific features
in a home that you purchase.
But unless you're willing to pay a premium
to build from scratch, 99% of homes are gonna lack
a lot of what you want.
It's all about compromise.
And I think it's important to lower your expectations
to a more realistic level.
If you can only afford $150,000 home
without putting yourself in a terrible financial situation
then expecting features that you would find
within a $300,000 home, doesn't really make sense.
It's always okay not to have every everything that you want
especially if your income doesn't match those ones.
You wouldn't buy a $10,000 car and expect for it
to have the same features as a Tesla would you.
If a home lacks the features that you want,
then the easiest solution might be to upgrade the house
to give it everything that you want.
But this can really destroy your finances
and doesn't always make sense.
If you want to call the home that you live
in an investment like most people wanna do,
then we need to treat it like one.
To do that, we should evaluate any potential renovation
or upgrade from an outside perspective
and as objective as possible,
I know this can be really, really difficult to do
because there's a ton of emotion tied up in your home
but just hear me out whenever there's a feature or upgrade
that might need to be done
take a look at the current market that you live in.
Check out comparable homes in the area
to give you a better idea so you're not over upgrading.
For example, the home that I live in has the ugliest kitchen
that you've ever seen.
It's 100% needs to be updated.
Just thinking about that wallpaper
makes me want to throw up in my mouth,
it is really, really, really bad.
Now my plan is to get it taken care
of when I eventually rent this thing out
but based on the market where this house is,
it doesn't make sense for me to do an insane upgrade
where I spent $20,000 to deck it out
and install one of those stupid pot fillers
above the stove that nobody ever uses
and I don't think should ever be put in a home at all.
I hate seeing homes with those in it,
it's like, how lazy are you to fill up the pot
at your sink and then carry it over to the stove?
Oh, my gosh, I might spill it.
- Well, don't fill it up so fricking high
instead over the past eight months or so,
I've been finding comparable homes on Zillow
that are for sale and rent
then clicking on the pictures of the inside
to get an idea of what their kitchens look like.
Now, this has given me a great idea
of how much I should be putting into my kitchen upgrade
to make sure that I'm not wasting money by over upgrading.
Think about that sort of thing
when the thought crosses your mind about doing
any upgrades to your home.
Sometimes it just doesn't make sense.
So you're better off not doing it except in your house
for what it is and looking for those specific features
and the next home that you purchase.
There's a few ways to make home ownership
even more worth your while and potentially some money.
The first is by doing some sort of house hacking
either buy a duplex, triplex or rent a room out
to a friend or family member to make just
a little bit of money on the side
that's a simple one.
The next way would be to intentionally buy
a fixer upper that's under market value.
Buy a home that might need some work done to it
and over the next handful of years,
do some of the upgrades on your own during the weekends
or hire out the work over time
just to make it a little bit cheaper.
The more time you give yourself the easier
it's gonna be to shop around prices
to make sure that you get the best deal.
That way you can guarantee yourself
a cheap mortgage payment
then when you go to sell their property,
you should make some money
since you created forced appreciation by taking your time
with the upgrades and only did the ones that you knew
whatever high return on investment.
Think of it like a long-term flip
with the added benefit of giving you a place to stay.
Plus you could look at it as a fun activity
to spend your time.
The next way would be to purchase a home
that might need some work with the intent
to eventually rent it out.
This is actually what I'm doing right now.
Run all of the numbers on our property
as if you were going to rent it out.
When you find one that works for you, buy it, move in,
do the upgrades, move out and rent that house.
Boom, instant income
and you had a place to live in for a few years.
If you want to take this one step further
to start building your real estate empire,
just keep doing this with every house you purchase
until your significant other gets annoyed with you
and forces you to stop.
Every single time that you move out of a house,
you'll leave behind an income producing property
that will pay you for as long as you own it.
Make sure to Hulk smash that thumbs up button
and check up description for more resources and playlists
to help out with all of your personal finance
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I'll see you in the next one friends, done.