Buying your first home is one of the biggest financial decisions you will make in your life, and likely the most expensive one you’ve made up to this point. But it can also be one of the best financial decisions you ever make in your life. A wise person once said (but I have no idea who – ha-ha!) that you “make money when you buy, not when you sell.” The gist is that you need to put some time and effort into finding the best deal, because you can realistically make a whole lot of money when you sell your first home.
Where and how does one go about finding a great deal? It depends. You may negotiate a price that’s cheaper than market value or find a sweet deal because the home is located in an underappreciated area. Or perhaps you have the ability to jump on an underpriced property as soon as it hits the market or — better yet – before it hits the market. A seller underprices for a variety of reasons (and not necessarily because the home needs work).
Here’s a case in point: I bought my first home in the middle of a Chicago winter, when hardly anyone was looking to buy a home. (That was my first advantage.) I had set up an online alert in my preferred neighborhood that would notify me every time a new property hit the market. (That was my second advantage.) I spotted an amazing deal ꟷ the homeowners needed to move and sell their place quickly. (Third advantage) One day after I got the alert, I saw the home and put in an offer. Since the owners really wanted to unload the home before the holidays, they gave me a 7 percent discount on the already low price. By my estimates, I had already made $45,000 on the property and the parking space, because I was able to purchase it at below market value. If I had wanted to sell that following spring (five months later), I could have probably made $70,000 profit. But I love the place and own it to this day.
A bit of advice: Check your emotions at the door and know when to say no and walk away. Too many first-time home buyers fall in love with a place, end up focusing on the wrong things and — starry-eyed — fail to negotiate as much as they should (or could).
A bit of advice: Check your emotions at the door and know when to say no and walk away. Too many first-time home buyers fall in love with a place, end up focusing on the wrong things (new granite countertops, that beautiful Juliet balcony, etc.) and — starry-eyed — fail to negotiate as much as they should (or could). You get 5 percent off, feel like you’ve won the jackpot and ꟷ voila ꟷ you bought your first home. But did you make a good investment? That’s another question entirely. Who knows?
Sure, you don’t have to consider your first home an investment, but why wouldn’t you want to — through just a few additional hours of searching and home tours — make an additional $5,000, $50,000 or maybe $500,000 or more in investment gains when you go to sell.
There are few easier ways to make money than in real estate and buying your first property is the perfect time to start. While it’s definitely no guaranteed that you will make money when you sell your home, it’s the only type of investment you can hold and also live in! So, before you head out there, do your homework.