One of the largest and most important decisions that many people have to make it whether to buy or not buy a home, and assuming you are deciding to buy…which home to buy. Everyone has opinions on this and for whatever it is worth this is mine.
First question becomes how long will you live there? If you are planning on staying in a location for 2 years or less I would say the odds are against you doing well with that property. I do respect that there have been many who did do very well “buying a place where they went to school and then selling for a prophet 2 years later“, but this is a very risky game, and I think most people who have watched the news this last couple of years have realized that the real estate market is not the goose that lays the golden egg. There have been many who have lost their shirt trying to “flip” a property.
Second question would be what are the markets for renting and for owning. You might as well know what you are entering into. If it is a great market to rent, then there should be very little encouragement to buy. If it is an ideal market to buy, then that would lean us away from the rental market. Sounds simple, but in almost every business district there are cycles of great rentals and cycles of great buys to be had.
Third, is the timing right for purchasing (general economics). Back in the early 80s in Canada interest rates were through the roof. A 5 year mortgage was sitting at it’s peak at 21.5% annually. That`s like buying a house and putting it on a credit card. A few years later this price dropped dramatically. Today interest rates are at record lows. Part of these poor interest rates are attached to economic uncertainty. If you think your job is relatively stable, then you are in a position to look at purchasing. If you aren`t sure you may do well to sit on the sidelines until you can answer that question with some certainty.
“Location, location, location” was the mantra I was taught when I started learning about real estate. Let me give you a quick example. Here are two homes, which would you expect to pay more for?
The trailer, just so you know is in a run down slum area in the North east of Saskatoon. It is just shy of 1000sq feet. The land is a postage size yard, and that was the best photo a real estate agent could get of the property. The brick home is from a site where people just put their photos us and try to sell their own place. The house is just over 2000 sq feet, yard and garage and fairly nice.
The trailer is listed for $35,000 the house for $34,000. Why? Location. Even though the trailer is in a rough part of town it is still within the city of Saskatoon. The other is in a small town, in fact, it appears to be a dying town about ½ hour from Yorkton. It’s an amazing house, but poor location.
So, let’s make this application more personal. We are renting now in a place that by most standards would be considered inadequate. We have 9 people in a 3 bedroom house. My son sleeps in the living room and rolls up his bed in the morning. We have a baby on the way. We are paying $400 a month in rent, which is better then we did in Saskatoon with an almost identical house we paid $1300/month. So, obviously we should buy right? I wish that was truly clear.
We believe that all of our actions should be prayerfully considered. We can buy a place and pay cash in the area. That would be insanely easy. In fact, we even have seen a home that we think would work. (5 bedrooms and 2 baths). Yet, we have not placed an offer on the location. The reason simply, is that God has not given us clarity, yet. A real estate agent can’t grasp this (even if he has a Mennonite last name). Time is of the essence, and he “has another couple who have expressed an interest”, so what? I have spent time in sales, I understand he doesn’t get paid unless I buy, so he’s motivated. The seller lives in another town. His work took him away. This house is dead weight to him. The seller is motivated.
I am trying to balance the spiritual teachings 1) don’t store up for yourselves treasures on Earth (Matthew 6) against 2) Prov. 31- where the noble wife considers a piece of land and buys it. Jesus (Yeshua) did not own a home, why should his servants think that should be our privilege? Yet, I am a father, and I know a “Home” would provide my children some sense of stability, which they could use in this world. The property is still very modest (significantly below our means). We can afford a place at twice the price and still not have be go back to work. In this case, I would own this property free and clear, not bad for a retired father of (soon to be 8). I think it makes economic sense. Yet, I have not received confirmation from our Lord…so we have to wait.
Follow up to this story: after making this post, I decided to make an offer. The house was originally posted at 62,500, so I chose 20% below that to see if there would be interest. We decided that we would walk at 52,500, so we offered 50,000. They took it even with conditions. The conditions will come off in the next couple days. Our possession date is Dec 4. Again, we are paying cash (no mortgage). So, now you know the rest of the story.
ReplyDelete