Buying a home is one of the biggest and most important financial decisions you’ll make—and that’s a lot of pressure. There are dozens, if not hundreds, of factors you’ll consider when making that decision, and that can be overwhelming—especially to first-time homebuyers.
Some people try to make their decision as objectively as possible, calculating the perfect price for a property and choosing a home with the highest likelihood of showing a return, while others go a subjective route, picking a property based purely on what they “like.” The best decisions, however, are ones made with both objective and subjective factors in mind.
These are some of the most important objective decision-making factors you’ll need to bear in mind when purchasing a home:
- Price (compared to other areas). First, take a look at the price of properties in the neighborhood compared to other areas, and what’s responsible for that pricing difference. For example, crime rates have a negative effect on housing prices, with a 10 percent change in violent crime rates corresponding to a 1 percent change (or more) in market prices. Consider choosing an area with more affordable housing—but without a significant drop in neighborhood quality.
- Price (compared to the same area). You’ll also want to look to see how the price of your target property compares to the other homes in the area. If it’s similar in size, quality, and condition, but seems to be selling at a lower price than other houses in the area, you know you’re looking at a good deal. Just be aware that real estate prices do fluctuate regularly, so be sure to examine how those prices have changed for that specific area over the past several years (and decades). Again, the ideal house will have a lower price than average, meaning you’ll eventually be able to sell it for a return on your investment.
- Home condition. The condition of the home should also be a significant factor. In general, newer homes are in better condition than older homes, because they’ve had less time to accumulate wear and tear—but this isn’t always the case. A home built in the 1930s that has been well taken care of and routinely renovated, for example, may be in better condition than a home built in the early 2000s that was not taken care of. This is one of the most important reasons why you should get a home inspection; a thorough inspection will reveal the true condition of the property, and whether the sale price of the home should be adjusted to reflect that condition.
- Your personal budget. Your choice in homes should also be limited by your personal budget. In general, you won’t want to spend more than 25 percent of your income on housing, but there are other factors to bear in mind here, including the cost of insurance, property taxes, and repair costs. Whether you choose a 15-year or 30-year mortgage can have an effect on how much you pay on a monthly basis, as can your mortgage interest rate and how much of a down payment you can afford. Make sure you do these calculations ahead of time so you have a ballpark for how much home you can afford.
- Physical location. The physical location of the home is also important, from an objective perspective. For example, how close is this home to the city? How close is this home to your place of business? How close is it to local amenities and attractions, such as grocery stores, gyms, and movie theaters? All these proximity factors can increase a home’s value in the long term; plus, you’ll save money in the short term by spending less on gas as you travel back and forth.
- School district ratings. One of the biggest factors for determining home value (and future home value) is the quality of the school district in the area, using a site like org. Even if you don’t have children and don’t plan on having children, the next homeowners may—and they’ll be willing to pay more for a home close to a good school district. Good school district scores will likely already be reflected in the price of the home, so keep them in mind.
Don’t rule out these subjective factors, either:
- Your neighbors. When looking at your prospective home, take a moment to talk to the neighbors. Do they seem friendly? Do they seem like the type of people you’d like to spend time with (or near)? Or do they seem like the type of people who don’t take care of their property and make disturbances in the neighborhood? It’s tough to judge a book by its cover here, but don’t discount the vibes you receive.
- The aesthetics. Nobody can tell you what makes you “comfortable” in a home. Some people want bright, vibrant colors, while others prefer more downplayed aesthetics. The shape, color, size, and interior layout of the home may appeal to you or repulse you, regardless of the home’s cost—so keep that in mind when making your decision.
- The work. You may also want a home that involves minimal work; for example, you may be willing to pay more money for a newer home that requires little in the way of ongoing maintenance. Or, you may have handyman experience that makes you willing to put in some extra work for a property that needs additional TLC (in exchange for a lower sale price).
If you’re buying a property for you and your family to live in, you’ll need a good balance of both objective and subjective decision-making. If you’re looking for an investment property, on the other hand, you might want to lean toward more objective factors, since your main goal will be striking a profit. If you’re interested in maximizing the return on your property investment, be sure to contact Green Residential—we’re here to make sure your investment stays profitable.