Before Buying a Home, Consider What You Will Need in Five Years.
The standard home buying advice is “buy as much home as you need”. Makes sense, right? For example, if a newlywed couple is buying their first home, a two-bedroom bungalow may be a smarter choice than a four-bedroom ranch.
But you also have to take into account another standard piece of advice when buying a home: don’t buy unless you plan to live there for at least five years . If newlyweds are planning to expand their family, their two-bedroom bungalow may seem too small too soon.
CNBC has a list of things potential homeowners should consider before making a major purchase , one of which is to think about the type of home you will need in the future:
Given that the experts only suggest buying if you plan to stay in that home for several years , think about what you need now and in the near future: Do you need a garage? Do you want to be in a specific school district? You might also consider how close you are to public transportation, grocery stores, and a hospital.
In other words: don’t buy a home you can live in today. Buy the house you want to live in tomorrow.
This does not necessarily mean that the home will be larger, although you will want to take into account the long-term impact of the space you choose to buy. (If you take one of the bedrooms in this two bedroom bungalow and your child gets the other, where do grandparents sleep when they visit?)
Yes, this house can be a little more expensive. No, it doesn’t have to be so expensive as to break your budget. If you are concerned about cost, remember that selling a home and moving to a new one is also expensive – and while you can profit from selling your home, you probably won’t make a lot of profit if you haven’t lived there for at least five years …
The reason for this [five-year] rule is that the closing costs and real estate commissions required to buy and sell are between 7 and 15 percent of the value of a home. Your home must be valued at the cost of buying and selling to break even. If you want to make money, the cost must exceed these fees.
So don’t buy a home if you don’t plan to stay – and don’t buy a home if it doesn’t look like it will fit the life you plan to lead in five years.