Consider your first car, your first home, your first long-term relationship–if you knew then what you know now, would you do things any differently? Here, three sets of homeowners each share a unique experience as a first time buyer, including what they did right, and what they’d do differently if given a second go-around.
The New Family
When Rich and Kerry Yee bought their first house 10 years ago, they picked a house for the cute, trendy neighborhood and its access to freeways. Kerry, an elementary school teacher, traveled six miles west each morning, while Rich headed north to his high tech job.
“We had a decent commute and came home to a really diverse and interesting walkable area,” Kerry said. But they hadn’t thought about where they planned to be in five years—starting a family—and how that would play out.
“It’s a very adult area, the schools aren’t so hot and our corner was a busy one, not right for having a toddler on the loose,” Kerry said. “It was okay when Lacey was a baby, but once she started walking and we decided to have our son, we realized we were in the wrong place.”
Within a year of the birth of their daughter, they put the house up for sale and moved to a far less trendy enclave of family homes. Kerry became a stay-at-home mom and Rich changed jobs twice, which left him with a 45 mile commute. “We ended up selling and then buying at the very bottom of the market,” Kerry said. “We came out okay, but that’s a lot of stress.”
Mary Pelanek, an accountant who advises families on their finances, says that not thinking through how the house will fit into your plans for your life is a common mistake. “Be very clear about why you’re buying this home. Make sure it’s what you want and that it fits into your plans,” she says. “Otherwise, you’ll find you’re back in the market sooner than you want to be.”
Pelanek says that a lot of people were born to rent, and there’s nothing wrong with that. “If your life is in flux, if you’re still chasing your career around the country, if you don’t have the extra money or want the extra responsibility, renting is a far better choice,” she says. “Owning a home is a great long-term step, but in the short term, it’s fraught with hazards.”
Homes are a great long-term investment—between the amazing tax breaks for paying mortgage interest and long-term appreciation, they can really pay off. And they’re really fun to have, if you’re ready. There’s a sense of security and freedom—freedom to raise urban chickens or paint walls purple or put an art studio in the garages or a tool bar into the kitchen—a sense of freedom you won’t ever have as a renter.
The Prospective Retiree
Paula Weber, who is a few years from retiring, is selling her first house 10 years after she bought it—on the heels of a divorce.
“I’m glad I bought it. It’s been a real home and a nest,” she said. “I wish I hadn’t refinanced as often as I did, even though I put most of the money into improvements. I spent about $80,000 of the equity on things that made the house nicer, but it looks like I’ll only get about $45,000 back when I sell it.”
Improvements—whether a kitchen redo, converting an ill-used space to an apartment or major landscaping—don’t always pay back, Pelanek says. There again, if the improvement truly enriches your life, do it. But pay attention to current trends and the homes you’ll compete with when you go to sell if your aim is to add value to the house.
“Plan to keep up with the Joneses, but don’t over-improve for the area,” she says. “Make sure you’ll either recover your investment or be delighted by what you’ve done, and stay to use it for a while.” People often spend a fortune on things like hot tubs and turning yards into “outdoor rooms” only to find they still don’t like to soak and they prefer to watch TV indoors at night, which is the only time they’re home.
“If it’s an update like a gourmet kitchen, are you sure you’re going to use it? That can cost $75,000, and you won’t recover more than $45,000 when you go to sell it. So you better make sure that you’ll actually use it and enjoy it,” Pelanek says. “The house won’t magically change the way you live.”
Reynaldo Calaveras and his partner split up six months after buying a house together, leaving Calaveras looking for a roommate and carrying all the responsibility of the payments and the maintenance in the meantime. If he had it to do over, he says, he wouldn’t have bought more than he could afford on his own.
“It’s way more responsibility than I wanted—yard work, cleaning the gutters, paying for a plumber when the drains back up—all those things I used to just call the landlord for,” he said. “And the payments are so high that I don’t have any extra money, not even for dinner out.”
Pelanek says that’s a common complaint, that people take on more than they can afford and don’t understand the extra layers of work. “You don’t want to end up house-poor. When the realtor says it’s just another $100 a month, you need to think about what you would do with that last hundred dollars,” she says. “If the fun you can afford is sitting in the house staring at each other, you’re going to hate it.”