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.
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 – 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 by looking up your address on Realm.
#2 – 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:
- 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.
- 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.
- 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.
- 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.
#3 – 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.
#4 – 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.
#5 – 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.