What is your American Dream? It could be having a stable job, owning a successful business, starting a family or owning your own house. For most of people, owning a house is their ultimate dream. There is variations of what kind of property you want to own. Hopefully something that you can live in.
Housing Types
There are couple housing types for first time home buyers:
- Single family home
- Multi-unit apartments(2-4 units)
- Condo
- Townhouse
- Mobile home (eh not really)
Single Family Home
If you do not want to live with neighbors sharing the same wall, ceiling or floor, single family home is your best choice if you can afford one. You can buy homes that are less expensive if you look for a house that is in not-the-best condition or further away from city centers. Single Family Homes(SFH) works the best in appreciation, that means its value will likely goes up more than other house types like condo or townhouses.
For most cases, you can use FHA for a low downpayment from 3.5% to 10% based on your credit score. You can also use a VA loan for a zero downpayment if you served in the military.
IT IS OK NOT TO BUY YOUR DREAM HOME
For your first property, when money is tight, it is okay to buy a house that might not have all the amenities that you dreamt. It is okay not to have a swimming pool, man cave, a jacuzzi, sauna room, 4 car garages etc. Get a property FIRST! Use FHA or VA loan if you can to get the property, the property appreciation is the best investment for yourself. Your money will be save from inflation for the long run. When you continue to advance in your career or business, you will have better buying power to buy a house where your dream sits. When you want to buy second or third property, you can pull the equity from your first house to do so. Having a property and access to a home equity line of credit (HELOC) is very important for your future investment and business capital.
Multi-Unit Apartments (duplex, triplex and quadplex)
This property type is the best for first time owner-investor. You will live in one of the unit and rent the rest of the unit(s) out to cover your mortgage. You want to buy this type of property if you don’t mind living with your neighbor who is also your tenants; have enough capital for the pricier property than the single family homes. Many real estate millionaires start with this type of property. You can use the rent from the rental units to cover most if not all your mortgage payments.
The beauty of this type of property is that you can ALSO use FHA and VA loan for it as long as you live in one of the units as your primary residence and as long as you don’t have more than 4 units in your property. Anything more than 4 units is consider commercial property and you won’t be able to use the low downpayment programs like FHA and VA.
Townhouses
You should buy townhouses if the price of a SFH and multi-unit apartments are too expensive for you or you just don’t want to deal with front lawn maintenance for your property. Honestly, I am not a big fan of Townhouses because you can a HOA fee that can change on you any time in the future. It can be $150 a month this year, but it can be $350 in couple years. When the community needs big fixes, HOA also raises. The townhouses do have their value appreciate, almost like a single family home, but the market would have less buyers when housing inventory is high because honestly who wants to pay HOA fees and share a wall with a neighbor?
Most Townhouses nowadays are basically cookie cutter houses that has limited yard space and lawn space. Some townhouses doesn’t even have a drive way, so when you look for your townhouse, you should pay attention to those things that matters to you.
Again, a townhouse might not be your dream home, that is okay, you can still use it to build your equity for future investments.
Condo
Condo is at a even lower price point than townhouses, this type of property doesn’t appreciate as much as the house and townhouses, but it still appreciate in a reasonable level in case of hyper inflation that we are currently experiencing right now in 2022. Condo is great for buyers who doesn’t really want to participate in the exterior maintenance for the most part and let HOA handles most of it. The downside for condo is that you might have neighbors living on top of you or on the bottom of you. My parents are currently living in a condo (3rd floor) and they can heard the neighbor’s kid running up stairs all the time. They also have the be careful not to make loud noises too since it can disturb neighbors around you or who lives under you on the lower floor. To be honest it is the least American Dreamy type of property.
HOA fees is more expensive for condos than townhouses (in most cases). Why? Because usually condos have more amenities, it might have a small gym/playground/swimming pool/hot tub. HOA will charge more for the maintenance of those amenities as well as your roof. If those amenities are appealing to you then condo would be a nice property to own.
Mobile Homes
I am very hesitant to put mobile home or modular home on this list because I don’t think it really appeals to me or most people that has a real American Dream. The land is not yours! I would stay away from this kind of property as my first property because you don’t own the land and it doesn’t have great appreciation value.
