The idea of buying a home as a millennial can be daunting. Wages have been stagnant your entire life, while the cost of living and education has skyrocketed. Homeownership, especially in attractive markets like Portland and Seattle, seems like it’s way out of reach for many. Although it appears to be a longshot, there are too many advantages to owning to pass up. Here are some unique tactics you can explore to start building your wealth rather than continuing to pay your landlord each month.
1. Buying to rent.
You probably lived with roommates in college or after moving from your childhood home. Why is it frowned upon to continue that trend for a few more years? It may seem unconventional to an older generation, but it is the reality of many born in the ’90s and after.
First of all, remember, the seller is going to end up paying your real estate agent. Go out and find a broker that fits well with your personality and busy schedule. Tell them right away that you intend to rent part of the space, so you ideally want an extra bedroom, bathroom, entrance to the house, and additional parking. You likely won’t find all of these, but it’s a goal to strive for if you want to live comfortably with your tenant. It is also important to remember that you still need to prove you can afford the house without the added rent income, as most lenders are not going to include that number.
Begin searching for a renter as soon as closing on the home is official. You likely won’t begin paying your mortgage immediately, so there is some time to work. Place ads on craigslist, classified websites, and even bulletin boards at your current apartment complex. Take as much time as you can to vet the candidates. Once you’ve narrowed things down, create some house rules, and figure out how much you are going to charge for rent. When figuring out your rental rate, make sure to factor in utilities and cleaning costs, that way you only have to deal with collecting once each month.
Ok so the sale was finalized and your new roommate accepted the terms, you are officially a landlord! Not so fast, there are some final steps to make this legal. You can contact a lawyer or online service to help draw up official documents and make sure to register in the residential rental registration program if required by your city. You will also need to pay taxes on this added income, so make sure you are saving a portion of your rent checks.
2. Look for up-and-coming neighborhoods
Now there is likely a good reason that your dream home is a bit out of your price range. Start to research communities in your city that are up-and-coming. You are young, this isn’t likely your forever home. The beauty of buying real estate is the investment, you can upgrade after gaining equity for a few years.
There are some amazing homes in areas you wouldn’t expect if you do some digging. Weigh the pros and cons of a long commute and the cost of transportation. You will likely find a much more affordable home the further away from the heart of the city you get. Your real estate broker will be able to help you distinguish what neighborhoods are on the come up and which ones you should avoid.
3. Lease to Own
Many brokerages have lease-to-own programs that they can help you with. Maybe now isn’t the time for a huge financial change, but you want to start working towards becoming a homeowner. It’s a lot like renting with the intent to own, so there is some more freedom when it comes to making space your own and finding something that suits you. For more information on lease-to-own homes in the Pacific Northwest check this out.
4. Be Open to Compromise
If you’ve decided to move forward and buy a home without a renter, you are likely going to have to make compromises when it comes to amenities. Maybe you always wanted a huge yard. Think about how much time it takes on the weekend for upkeep, so downgrade the yard. What if you wanted to be close to a park? Those property taxes are likely going to be much higher than a home further away from a nice public area. You can always bike to the park. Need a basement? Try an unfinished basement and slowly upgrade the space on your own. The sooner you think about your new living space as an investment and not a forever home, the easier it is to compromise and make a purchase sooner rather than later.
Owning a home as a Millennial is a lot harder than it was for your parents 30 years ago, but it’s not impossible. The generation of side hustles has had to adapt to get by in the world. You’ll need to continue to adapt your lifestyle to start building personal wealth through real estate and we can help you start planning, contact us today!