How to Clear Your Real Estate Hurdles & Get in the Game Pt 1

Disclaimer: Buying a house may not be right for you right now! But if you plan on purchasing property at some point, some way, somewhere, read on. 

Purchasing property was the best financial action I've ever taken. My owned property is my (early) retirement plan, my financial security blanket and has since become my career path. Real estate acquisition has been my gateway to learning more about financial literacy, construction, interior design, and small businesses. In a lot of ways, I feel like I have the secret cheat code to unlimited upward mobility, freedom and income control. But it's not a secret! And it's legal! And it's not that hard! 

When I talk to people about buying real estate, I hear 8 common hurdles preventing them from getting in the game. 

Your Real Estate Hurdles

  1. I don't have enough money saved

  2. I don't make enough money to be approved, let alone afford a monthly mortgage

  3. It's scary!

  4. You buy a house after you get married, and I'm single af

  5. I don't want the responsibility of owning a home - I can't fix toilets!

  6. I don't know if I'll be in this city forever - you can't tie me down!

  7. My credit sucks and/or i have too much debt

  8. My city property value is too high! and/or my ideal neighborhood is too expensive!

My Response to Your Real Estate Hurdles

I don't have enough money saved
You may not have enough liquid cash for a down payment plus closing costs, but don't let that stop you from thinking. First step is to research government programs in your state. In Texas, there is a program that pays your down payment AND closing costs, essentially getting you into the real estate game with $0. Incredible. There are also programs for teachers, veterans, public service workers and options to wrap your down payment and closing costs into your loan. The government wants you to buy property! 

Borrowing money for a down payment is technically illegal.....BUT you are able to get a "gift". I had NO money saved when I wanted to buy a house in 2013. I was a year out of college, I had student loans, a car payment, etc. Initially, I borrowed a couple grand from my mom - enough to put 3.5% down on a low budget house. The market was BOOMING and I wasn't able to win any contracts with such a small down payment. After 10 offers and 10 rejections, I rerouted. I called in the big dogs and borrowed more money from extended family. My family is not rich. I put together a well-thought-out proposal. I made a payback plan (shhh). I compiled earning projections and appreciation averages. I was going to buy a house and no one was going to stop me. (it is absolutely possible to put 3.5% down in the current market)

I don't make enough money to be approved, let alone afford a monthly mortgage
Entry level jobs pay about $40k these days - usually more. With my $43k teaching job, $30k in student loans and a car payment, I was approved up to $250,000. You would be surprised what your salary will afford, depending on your debt to income ratio (monthly debt/monthly income x100). Lenders are looking for a total debt to income ratio (after the assumption of your mortgage) of LESS than 50%. Here's a scenario: 

Monthly income: $4,000 (salary of $48,000/year)
Student loan payment: $250
Car payment: $200
Credit card payment: $150
Mortgage: $1200

Debt to income = (1800/4000 x 100) = 45%

NOT TO MENTION HOUSE HACKING! House hacking is what I've always done to supplement, or even erase my mortgage payment. Example of house hacking include having a roommate who pays a portion of your mortgage, renting rooms or extra spaces on Airbnb or HomeAway, buying a duplex and renting out the 2nd unit (my fav idea right now).

It's scary! 
Grow up. Just kidding. It's a lot of money! I get it. Also, the mortgage crisis happened! I double get it. If you're buying at the top of your budget, maxing out your monthly DTI (debt to income), and are barely able to make your payments, then YES IT'S SCARY. DON'T DO THAT! If you are buying an appropriately priced house for your budget, negotiating for repairs and house hacking, it is the opposite of scary! It's much cheaper than renting AND YOU'RE PAYING YOURSELF. So in short, grow up. 

You buy a house after you get married, and I'm single af
I can barely respond to this, but I will, because society tells us the only appropriate life steps and I hate it: 
18-24 Young and free! Don't worry about finances because you're young and free and broke! Also, we're not going to teach you about taxes or credit or investing because you're YOUNG AND FREE.
24-28 Start to get more serious about life, you know, get a salary job with a 401k - maybe the company even matches! Loosely learn what a 401k is. (all the while paying someone else's mortgage)
28-31 Meet THE ONE, get married (spend a wild amount on the wedding because it's the most important day of your life) (still paying someone else's mortgage)
31-35 Buy the perfect house together, max out your budget and live as a traditional family unit with a hella high mortgage. But double vanities and a good school district! 
35+ Get more and more in debt because you're supposed to have the fancy car to go in the fancy driveway etc etc. 

TO BE CLEAR: If you did this, I still love & approve of you. 

But really. Being single is not a hurdle to buying a house. You are all strong, capable and responsible humans. You can do it if you want to. 

My responses to hurdles 5-8 in the next post. 

 

Photo by Aundre Larrow

Photo by Aundre Larrow

Stephanie DouglassComment