Real estate is often the biggest financial investment a person will make in their lifetime. Knowing that, thinking about how to save to be ready for that investment can be intimidating and daunting. Developing a strategic plan of savings can help you make the American dream of real estate ownership a reality.
To start planning your next home investment, whether it’s a first home purchase, an upgrade to a larger home or a remodel on your current residence, start with defining your goal. For home purchases, a target of 20% down payment will gain you better mortgage rates and put you in a stronger negotiating position for your purchase. For remodels, talking with contractors to get budget pricing on your project will help you create a target savings amount to allow you to pay cash for most or all of your project through your savings.
Once you have your goal set, developing a strategy and timeline for your savings plan will help you put the details around your concept and turn it into reality. If your goal is to purchase a $100,000 home, with a saving goal of 20% or $20,000 and you want to start house hunting in a year, you’ll need to save an average of $1600 per month if you are starting from zero. If that’s not realistic, you may need to change your time frame and target house hunting in two years allowing you to save $800 per month.
With your timeframe and goal outlined, it’s now time to tighten the belt. Start by tracking and categorizing all of your expenses including groceries, eating out, cable, cell phone and gas. See where your largest expense are and what options you have to shrink those. Can you go from one meal out every week to once every two weeks? Can you carpool with a co-worker to cut gas expenses in half? Can you simplify your cable bill & move to basic cable or free services to save? There may also be options to renegotiate cellular service, rental agreements or other expenses to lessen costs. Can you increase your income potential with a second job or a salary increase at your current position? Think about all the levers you have to increase income or reduce expenses and start tackling them one by one.
Once you’ve begun your savings journey, keep track of your successes and progress against the timeline. You may find that you can move your timeline forward or that you need to adjust to accommodate your spending and savings trends. After you have a nest egg, you may also be able to consider additional sources for financing for a remodel or home purchase to allow you to move forward with your project ahead of schedule. With some savings, you can discuss a higher level of financing percentage with a mortgage loan officer or may want to consider a home equity line to fund the remodel.
Making your real estate dream a reality is doable by setting goals, defining a plan and tackling your savings strategy one step at a time. Work with friends, family or your financial advisor to establish a team of support to help you meet your goals and celebrate your successes. Once you have that nest egg, call our team at Outer Banks Realty Solutions at 252-261-9003 to help you make that real estate dream come true with you next home.