This is the first part of the comprehensive Real Estate Guide here at Simple Financial Freedom. The first part focuses on your primary residence, the home that you live in. This article assumes that you own your house. I believe there are three components to the strategy surrounding your primary residence.
Keep Your Costs Low
Number one, I always say that your primary residence is an expense. A major expense. Therefore, in order to manage your finances effectively, you need to keep this major expense low. So, how do you keep it low? I recommend the following:
- Don’t buy a large home – Larger homes are more expensive in many ways: your mortgage payment, the insurance, the taxes, the cost of heating/cooling, the cost of upkeep – simply put , the bigger the house, the more expensive.
- Be cognizant of all costs involved - Many people factor in the mortgage payment at that is it. Don’t forget to factor in taxes, insurance, homeowners association dues, etc.
Add Value & Differentiate Your House
A few years ago, at the height of the real estate bubble, adding value was a no-brainer. Every dime you spent on anything for your house was a good investment, because home values were skyrocketing. Today, we have a much different story. It no longer makes sense to make significant investments in your home in many cases. For example, if your home is up-to-date to a sufficient level, re-doing your kitchen or bathrooms is probably a waste of money.
Instead, it is better to go for the lower cost ways to increase value and make your house stand out. There are some simple projects that can boost your home value and make it stand out from competing houses when you’re trying to sell it:
- Freshly painted interior – neutral colors are probably best
- Add inexpensive shelving
- Keep your landscaping simple and sharp
- Outdoor fencing
- Clean attic & garage
I believe working to differentiate your house from other homes (especially, in many new developments where many homes are alike) is a worthwhile strategy. For example, you might put some lush landscaping in with some brick pavers in your back yard. If you have a wonderful outdoor living space and the other similar house does not, which house would a buyer prefer? Yours.
Paying Off Your Mortgage
I strongly believe in paying off one’s mortgage. Sure, it’s the cheapest money you’ll probably ever borrow, but you’re still in debt. Debt is debt, even if it’s low interest. Now, with that said, I don’t think you should put off other investments and savings while allocating every dime to your mortgage reduction plan. Instead, create a simple plan of allocating a chunk towards your mortgage, some towards retirement and some towards something else.
Imagine the feeling of not having a house payment every month? Imagine the capital you would have free to invest and allocate towards other areas. It’s a dream of mine and one I’m pursuing.
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