7 Tips for First-Time Homeowners

Are you a pandemic homebuyer (or about to be one)?
We’ve got you covered

COVID has impacted every aspect of the economy, and real estate is no exception. We’ve all read about rents dropping in top urban areas like New York City and San Francisco, newcomers arriving in droves in states with 0% income tax like Texas and Florida, and house prices in small towns are skyrocketing.

Maybe you were tired of being cramped in your small city apartment. Maybe remote work allowed you to move to your favorite small town. Or maybe you were eager to have some more private outdoor space

No matter the reason, if you’ve purchased your first home during the pandemic — congrats! Here are answers to a few questions that might be on your mind:

#1 – Was this a bad decision?

The short answer: No.

Every new homeowner feels uncertain about their decision. You’re not alone. Keep in mind that you’re investing in a beautiful new space to live in, without blowing all your money on rent.

Imagine you paid $3,000 in rent before your home purchase. If you put 20% down on a $650,000 house, your current monthly mortgage is likely around $2,200. In the first year, about $1,200 is going toward interest (think of that like rent) and $1,000 is building equity in your house. 

Did you know? You can access up to 90% of your home value through home equity loans, so don’t fear that a lot of your savings are going towards a monthly payment. You can pull it back out as you need it.

#2 – Did I get a good deal?

There’s always some uncertainty involved with any financial investment, and COVID has introduced even more uncertainty to the market. While it’s impossible to know for sure, it may be helpful to think about the potential value for your property. If you bought a property that needs no work, you likely paid more but won’t have to invest additional income. However, if you bought a property that needs some improvements, you’ll have to spend more now but can capture the upside in resale or through a cash-out refinance.

You can view the estimated potential value for your property in your Realm Dashboard.

#3 – What do I need to budget annually for home-related expenses?

There are 4 buckets of expenses that will be new to you as a first time home buyer.

Expenses can be highly variable based on the specifics of your property and geography, but here are a few benchmarks to get you started:

  1. Taxes – On average property taxes are 1.08% of the home’s value, although this varies based on location. Remember, state and local property taxes are generally eligible to be deducted from your federal income taxes.
  2. Home insurance – On average insurance nets out to $1,550 annually. This varies based on the odds of a natural disaster in your city as well as your home value.
  3. Repairs – On average repairs will cost $1,105 per year. This depends on the age of your home. Homes built in the last 10 years need very little maintenance, whereas older than 10 years will need consistent maintenance. We recommend setting up a savings fund equal to 1% of the home’s value each year to be prepared for the unexpected.
  4. Improvements – On average homeowners invest $8,000 per year. This is the most fungible category. If you’ve bought a home that isn’t quite up to par with your standards, you might want to budget more for improvements.

#4 – Which home projects should I tackle first?

We recommend thinking about two factors:

  • What will create the most value for you — in terms of finances or in terms of livability and enjoyment. If you’re optimizing for financial return, start by understanding the estimated impact of each project on your home value (see next question for more). In regards to enjoyment, that’s purely up to you and your housemates or family. 
  • What you can afford — in terms or cash or loans. Loan interest rates are low right now, so you have several good options when it comes to construction loans, personal loans, and home equity loans. If you’re unsure about which loan is best for you, grab a 15-minute call with one of our Advisors.

#5 – How should I set a budget for each project?

Start by understanding the impact each project will have on your home value and the high-level cost estimate for your area, which you can find in your Realm dashboard

From there, you’ll want to understand categorical pricing for the things you’ll need, like finishes, wood & plastics, electrical, installation, or design. Our Project Planner report will provide you with these insights. If you’re planning to do any of the work yourself or source your materials directly, you can bring down the costs in each category accordingly.  

#6 – Should I get my house reappraised after major renovations?

If you’re not looking to tap into your home’s equity, then it’s not important to prioritize. But if you are looking to access funds through a home equity loan, then a reappraisal will be an important part of the lending process.

After a major renovation, your home will likely be worth more which means you’ll have more equity. The lender (or their appraisal management company) will order an appraisal to help you tap into your home’s higher, post-renovation equity

#7 – How do I go about finding a reliable contractor?

If you’re in Southern California, let us help you. Set up a complementary property review with one of our Advisors to get started.

If you’re in other parts of the country, the best way to find one is to talk to your neighbors for recommendations — that is, until we’re able to help you. Make sure to verify reviews for recommended contractors with the Better Business Bureau, and ask for references. Always check their references and ask if you can visit or drive by previous projects to determine their work quality. 

Do you have any other questions you want us to answer? Comment below.

On the fence about buying? We know it can be overwhelming. Check back soon for tips for you.

Published by Realm

Get more out of your biggest asset: your home. Realm shows you what your home could be worth & how to access more of its potential. We analyze thousands of unique data points—from property history to neighborhood trends to project costs—to measure your property’s potential and equip you with the personalized insights and practical recommendations you need to make smarter financial decisions.

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