Types of Second Homes

Rental Properties
Rental properties are second homes purchased with the goal of making a profit. These properties can either be long-term investments or short-term, flip-style purchases. They range from houses to condos, and everything in between.

Long-term investment rental properties are homes bought with the intention of selling them later when the market has significantly increased their value. These types of properties became especially popular during the housing boom of the mid-2000s when home values skyrocketed. However, such markets are rare, and people looking to sell homes for profit must often be prepared to hold onto the property for an extended period. During this time, the property can be rented or leased to interested parties. The rent should, at the very least, cover the mortgage and property taxes. In many cases, long-term investors find that their profits increase over time as the value of the property rises. Similarly, as with selling prices, the amount a homeowner can charge for rent will go up, allowing them to eventually charge more than the mortgage payment.

On the other hand, homes bought to flip quickly are a different matter. Often, owners of these properties finance their purchase with a second mortgage. The goal is to sell the property quickly, often before the first mortgage payment is due. Remember, the initial payments on any mortgage are where the bank earns the most interest!

Vacation and Retirement Homes
Vacation and retirement homes have gained significant popularity in recent years. With more disposable income, many families are choosing to invest in property they can move to when they retire. As real estate is being snapped up all over, savvy vacationers are increasingly interested in purchasing property in prime vacation spots where they can enjoy yearly holidays.

As with income properties, owners of vacation and retirement homes also have the option of renting out their properties to help finance their second home. One option is to charge a standard rent, where the owner collects a monthly fee for allowing someone to live in the house. Again, the rent should be set slightly higher than the mortgage payment, as the owner will need to cover property taxes, other fees, and any necessary repairs that may arise if the tenant proves to be problematic. Since the goal of a vacation or retirement home is not necessarily to make a profit, but simply to pay off the mortgage, there is less pressure to charge excessively above the mortgage amount.

Owners of vacation homes may find it inconvenient to rent to a monthly tenant, as this could interfere with their own vacation plans. However, there are exceptions, such as vacation homes that are primarily seasonal. Properties like condos on ski hills or in resort areas can be rented out to workers during the off-season and still remain available for personal vacations. Second-home owners might also consider building a separate suite on their property to rent out. There is always demand for rental properties, particularly in resort areas, and an add-on can be a great investment year-round.

Financing Vacation Homes Year-Round

Another way for vacation home owners to finance their properties year-round is to rent them out on a weekly basis to other vacationers. Many people purchase vacation properties in highly popular areas where hotel prices are often prohibitively expensive. More and more families are realizing that renting a private condo or house can be a cheaper and more comfortable alternative to staying in hotels. These rentals come with all the comforts of home, offering a much more relaxing experience for vacationers. Families can rent your vacation home for blocks of two or three weeks, or even longer. This allows owners to plan their own vacation while also making mortgage payments through rental income.

Renting out vacation homes has become so popular that many resort areas now have entire industries built around renting out properties. Vacation home rental companies handle bookings, cleaning, and providing supplies for the property owner, though these services come at a cost. Many homeowners find that the cost is well worth it, as the company takes care of nearly all concerns related to managing the property.

For those purchasing second homes, it’s important to note that the investment itself plays a key role in determining how successful the financing will be. Don’t purchase a vacation home in an isolated area and expect to finance it purely through rentals. Renting is generally only viable in or near busy resort areas. An isolated second home may require more work to advertise it as a rental, or you may need to rely on your own income to cover mortgage payments.

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However, when you’re in the market for a place to hang your hat, there are many more factors to consider than just the basic materials of the structure. If you’re building a brand-new home from scratch, one of the biggest decisions you’ll make is choosing a home builder.

Out of all the purchases you’ll make in your life, your house has to be at the top of that list in importance. So, how will you know if your home is in good hands or not?

Research and Credentials: The First Steps in Choosing a Builder

The first step in selecting the right home builder is to research various networks of contractors. The vast World Wide Web is a great way to get in touch with different contractors and compare rates and reputations. You want to use a resource that only includes the most experienced and professionally trained contractors in its database. Contracting firms will screen potential builders so that you don’t have to deal with any “bad apples.”

Note: If a contractor doesn’t have membership with NARI, the National Association of the Remodeling Industry, you’re likely dealing with a bad apple. Members of NARI adhere to a special code of ethics and are certified professionals.

Once you’ve verified that the home builder meets the basic credentials, you can dig a little deeper.

What business does the builder work for? What are their contacts and other industry associations? Answering these questions will help you size up the contractor. A builder may look good on paper, but if they’re employed by a company that is not well-established, it’s reasonable to be skeptical—and you should probably move on to the next candidate.

In addition to checking the contractor’s employer, make sure they are licensed with the local and state government (though this isn’t always required). Also, ensure that all reputable home builders are fully insured.

By now, you may have narrowed down your choices and found a few contractors who seem appealing. But your job isn’t over yet. It’s time to double-check your options using a consumer watchdog agency. The Better Business Bureau (BBB) is a great resource—it can tell you if a home builder has a history of complaints or penalties, or if they have a squeaky-clean reputation.

The Face-to-Face Interview: Digging Deeper

Still, you’re not quite ready to decide on a contractor just yet! You need to have a one-on-one, face-to-face meeting with the builder. This is your chance to ask tough questions. After all, this person will be constructing the home you may live in for the rest of your life. You need to ensure that the builder is not only qualified but also understands your personal needs as a home buyer.

When selecting a home builder, what questions should you ask? You can ask more detailed questions about what you’ve already researched—for example, inquire about the builder’s place of employment and personal track record. But you also want to ask specific questions about the construction process. How long will it take before the house is ready for move-in? How many crew members will be on hand?

Treat this meeting like a job interview. Just as an employer would ask for references from a potential employee, you should do the same for your home builder! But where should these references come from? They shouldn’t come from the contractor’s best friend, mom, or the head of his or her business. Instead, ask for the contact information of the builder’s former clients, and then ask those clients about any problems they encountered.

When you finally choose a home builder, you should feel 100% confident in your decision. The process of selecting a contractor is certainly long and tedious, but it’s one that cannot be overlooked. Fortunately, it’s a process you won’t regret taking seriously! Consumers read reviews and comparison shop for the most insignificant, inexpensive products, so why shouldn’t they do the same for a contractor who is going to build their home?

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In Canada and the United States, there are similar mechanisms for purchasing foreclosures, but provincial and state laws govern these processes. Those interested in buying foreclosed homes for investment purposes should be aware of the nuances in laws that vary from province to province and state to state.

Buying a Foreclosure in Canada

In Canada, there are two primary procedures for handling foreclosures. The first is called a Judicial Sale, which involves court intervention. The lender must file a case against the defaulting borrower to seek permission to sell the property. The following provinces in Canada follow the Judicial Sale process:

• British Columbia
• Alberta
• Saskatchewan
• Manitoba
• Quebec

In Nova Scotia, it is referred to as Mortgage Foreclosure, but the procedure remains a Judicial Sale since the court is involved.

The second procedure is the Power of Sale, which can proceed without court intervention. Here, the lender takes necessary steps to sell the property if the borrower defaults. This right to foreclose is stipulated in the loan or mortgage documents.

Provinces Using the Power of Sale

The following provinces use the Power of Sale type of foreclosure:

• Newfoundland
• Ontario
• New Brunswick
• Prince Edward Island

Even though some provinces fall under Judicial Sale or Power of Sale, the procedures can vary. Specific steps must be followed in a particular order before a foreclosed property can be sold.

Buying a Foreclosure in the U.S.

In some U.S. states, there is a pre-foreclosure stage followed by the foreclosure stage. Some states use the Judicial Method, others the Non-Judicial Method, and some utilize both procedures.

Real estate investors in the U.S. who specialize in pre-foreclosures and foreclosures find this area of real estate particularly exciting. Banks typically do not like to keep foreclosed properties on their books for long, often selling them at significantly reduced prices. However, caution is crucial when buying a foreclosure; conducting due diligence to ensure the property is free of liens or lawsuits is essential.

A savvy real estate investor pays attention to city hall proceedings, which could be at the town registry, county clerk, or a similar municipal office. When an individual defaults on a mortgage payment, they receive a Notice of Default, indicating that they have not lost their house yet.

Upon receiving a Notice of Default, lenders are often willing to negotiate with homeowners to resolve the payment issue. Depending on the state, this notice typically allows 30 to 90 days for the borrower to address the situation.

If the loan remains unpaid after this period, a Notice of Trustee Sale is sent, indicating the homeowner is about to lose their property. A date for bidding at the courthouse is then scheduled, marking the beginning of the foreclosure process in the U.S.

Astute real estate investors often act before the Notice of Trustee Sale is issued. They monitor public records for Notices of Default and may contact the property owner to offer to buy the property before it goes into foreclosure. This can lead to homeowners selling their properties at low prices just to avoid court proceedings.

In some cases, the investor may allow the homeowner to remain in the house, charging a monthly rent.

Buying a Foreclosure: Take a Closer Look

While buying a foreclosure can be a lucrative investment, the classic “buyer beware” principle applies. Ensure that the property isn’t a “doghouse” or “outhouse.” If a homeowner has defaulted multiple times, it suggests they may not have the financial capability to maintain the property.

If the house is in disrepair but situated in a good location, investors might negotiate a good price. However, be cautious of properties in deteriorating neighborhoods, as no amount of renovation may fully recoup your investment. Renovation costs can also exceed your budget, particularly since auctioned homes have not undergone inspection. How comfortable are you with purchasing a property sight unseen?

Additionally, not all foreclosure prices are necessarily bargains.

Ready to Buy a Foreclosure?

Before proceeding, access reputable databases or foreclosure notice services that maintain updated lists of pre-foreclosures and foreclosures in your area. Some services charge a fee for this information, covering all Notices of Default, Notices of Trustee Sale, and REOs (real estate owned by banks).

If you choose to buy foreclosures, remember to conduct thorough due diligence. Ensure you have all necessary documentation; if unsure, seek professional assistance.

Investors agree that buying a foreclosure directly from a private homeowner is often the best approach. This method avoids court hassles, and as long as both parties agree on the terms, it can be a win-win situation. Although the homeowner may sell below market value, this route eliminates the burden of judicial proceedings.

Auctions for foreclosures are best left to experienced investors. If you decide to participate in an auction, be prepared to do your homework and come ready with your checkbook!

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When we talk about new build homes there are two options to consider. The first is the custom home that’s been designed specifically for you, with all the details that you wanted, while the second is what’s called a ‘spec’ home, and while there are benefits to buying the latter kind of home, there can also be drawbacks.

What is a Spec Home?

First let’s talk about what exactly a spec home is because it’s important to note that spec homes can have different names, depending on where you are in North America – you may hear it referred to as a move-in ready home, featured home, inventory home, or immediate delivery home, but basically these all mean the same thing.

A spec home is a house that has been designed and constructed by a builder without a specific buyer in mind. Basically the builder has taken the chance that he will be able to sell the home once complete, or near completion. Obviously the builder is taking a little bit of a gamble here, hoping that a buyer will come along before too long, and because of this he wants the home to appeal to as wide a market as possible. The architecture, therefore, will be based on a standard plan, probably using a design that’s popular for the neighborhood they’re building in. Usually the fittings will be what’s called ‘contractor or builder grade’, though some builders may offer the chance to upgrade for an extra cost.

The Advantages of Buying a Spec Home

Really there are three big advantages to buying one of these homes: the fact that you can move in very quickly, the fact that it’s completely new, and the fact that you can see exactly what you’re buying.

Move In Ready
A spec home is usually offered for sale very close to, or at its completion, and considering the builder is likely to want a quick sale you can often move in very quickly. The only thing delaying the process is likely to be your lawyer, making sure everything is in order, but if they can get through the legal process quick enough, you could be moved into your new home within a couple of weeks! This makes a spec home a great choice for a buyer who wants to move quickly; whether it’s your first home, or you want to be moved out of a rental home before the end of the month.

It’s Completely New
The fact that a spec home is completely new is appealing too, and though this isn’t always the case, some builders may allow you to choose your own paint colors and finishes, or negotiate some upgrades, if you approach them early enough. This way you to get to make some of the decisions and end up with a home that you’ve had at least some say in the look of!

You Get to See the Home Before You Buy
When you’re paying for a custom built home, it’s going to be some time before you really start to see it take shape, and during that time there are bound to worries over the quality of the craftsmanship. With a spec home you get to see it before you buy and you have the opportunity to inspect every corner of the home to make sure you’re happy with the finishes.

The Disadvantages

The biggest disadvantage of a spec home is choice, or rather your lack of choice. You will have to live with all the decisions that someone else has made. Things like the overall architectural style of the home, and the internal layout and room configuration, so a spec home isn’t for a buyer who prefers to be individual and wants a home that looks different to everyone else!

The same applies for the finishes too, whether we’re talking about paint colors, kitchen and bathroom fittings, lighting, and appliances. The builder is likely to have chosen items that he can get at a contractor’s rate, and while they may be of a good enough quality, they are unlikely to be high-end, so you’ll need to live with these things, or change them at your own expense.

As mentioned above, you may be able to have some say in the finishes, depending on how close to completion the home is. Though often you will still be forced to select from a list of options, so even then the choice is not completely your own.

Things to Remember
So if you’re still considering buying a spec home there are some important points that you should remember…

Even though the home is completely new, doesn’t necessarily mean everything is in working order. You MUST get a home inspection so that plumbing, electrical, HVAC and more can all be checked by an independent, unbiased inspector. And choose the inspector yourself, do not go with one recommended by the builder.

Use a real estate agent to help you through the buying process – you won’t have to pay them a cent yourself as the builder pays for this, but their experience will be invaluable and likely save you a lot of time and headaches.

Finally, don’t forget to ask if you can make any changes to the home, even if it’s already complete, as some builders will allow this. Paint colors and flooring are possibilities, while some builders may offer an upgraded appliances package.

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A show home typically features all available upgrades and numerous designer touches. While it’s technically a “new home” because no one has lived in it, everything is already complete and move-in ready.

With the real estate market experiencing fluctuations, many builders are scaling back on new construction. To reduce costs, they often sell off model homes. This allows them to recoup some investment now, and when the market rebounds, newer trends or neighborhoods may call for entirely new models anyway.

Buying a show home from a builder can be a win-win situation. However, there are a few important things to keep in mind when considering a model home purchase.

The Ups and Downs of Buying a Show Home

Pros and Cons of Buying a Show Home

The biggest advantage of buying a show home is that everything is top-of-the-line. Remember, this home was designed as a sales tool for the builder. The more upgrades they can display, the more they can potentially sell—meaning most show homes include premium flooring, cabinetry, countertops, molding, lighting, windows, doors, architectural features, appliances, and other fixtures.

These homes are often professionally decorated as well. While builders usually retain any furniture brought in for staging, buyers may benefit from extras like curtains, blinds, floral arrangements, or even wall art. Professional landscaping is also commonly included.

You might even find luxury features such as decks, fireplaces, spa tubs, or pools—amenities that would normally cost tens of thousands of dollars as upgrades—already built in.

While that all sounds ideal, it’s important to ask a few key questions. For example, has the home ever been lived in, even temporarily? Don’t make assumptions. While most show homes are only used for display, a builder may have allowed someone to stay there—or may have even lived in it briefly themselves.

Even if no one has lived in the home, remember that it’s likely been visited by hundreds of people. The carpet may have been cleaned frequently to maintain its appearance, and the walls could have had numerous touch-ups. Be sure to ask about any damage that may have occurred and how it was repaired. Builders may fix things cosmetically without considering long-term durability.

Before committing to a purchase, spend time walking through the home and evaluating its practicality. Show homes are sometimes designed to be visually impressive, but they may sacrifice functionality. That stunning double-sided fireplace may be a conversation starter, but does it leave you with no logical spot for your television?

When hiring a home inspector—which you absolutely should—make sure they’re aware the property was a model home. Ask them to look out for details often overlooked in show homes, such as improperly installed appliances or unsealed tub enclosures. A home may look beautiful but still not be ready for day-to-day living. Make sure it’s ready to be lived in—not just looked at—before signing on the dotted line.

Closing the Deal on a Show Home

As with any home purchase, it’s crucial to have someone representing your interests. Buying a show home offers the opportunity to enjoy high-end features that might otherwise be out of reach. However, don’t let excitement lead you to rush the process. Work with a trusted Realtor or real estate lawyer who can carefully review all the paperwork before closing the sale.

Keep in mind that this is a buyer’s market. Even though show homes can be rare and desirable, you shouldn’t feel pressured to act too quickly. Builders with show homes are usually well-established businesses and are likely to be far more experienced in negotiations than you. Don’t let that imbalance work against you.

Having a real estate professional guide you through the process can help you avoid the common pitfalls that come with over-eagerness. Protect your interests, take your time, and you could end up with a beautiful, feature-rich home—one that makes you the envy of your friends and family.

Good hunting!

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All the usual real estate norms were thrown out the window during the 2005 housing boom. Sellers were encouraged to aim high with their asking prices, and buyers were advised to make offers immediately on any home they liked. Even the traditionally underwhelming tactic of the open house became wildly successful for sellers during this time.

The Seller’s Market

What happened that year is known as a seller’s market, which typically arises from a combination of the following factors:

• **Low housing inventory**: Fewer homes are available for sale—either they’re being sold before hitting the market, or homeowners aren’t interested in selling. Additionally, new construction slows down. This is common in areas where land use has reached capacity.
• **Low interest rates**: These rates play a crucial role for homebuyers. Lower interest rates—often influenced by a nation’s financial policy—mean buyers pay less in mortgage interest over time. Even a 1% drop in interest can equate to thousands of dollars saved on a home loan, motivating more people to buy.

It’s important to note that seller’s markets don’t apply to all real estate sectors. Even during the explosive growth of 2005, some regions across the country didn’t experience significant price increases. Housing prices are highly regional, so one strategy for avoiding a heated market is to look in areas considered less desirable by the majority.

Buying in a Seller’s Market

One unique aspect of a seller’s market is its self-sustaining nature. Lower interest rates attract more buyers, which leads to even fewer homes on the market. As a result, buyers need to do some legwork before they start viewing homes—and they must be ready to act quickly once they find one they like.

Preparing Ahead of Time

Before you begin house hunting in a seller’s market, there are a few essential steps to take:

Get pre-approved for a mortgage. Pre-approval shows sellers that you already have financing in place. In a competitive bidding situation, offers without proof of funds are often immediately dismissed.

Have a strong down payment. Some real estate experts suggest that a larger down payment may help your offer stand out, though the exact benefit to the seller may vary.

Work with a qualified real estate agent. In a hot market, many homes sell before they’re even officially listed. A well-connected agent will know what’s available—and what’s coming soon. Agents also understand market trends and can help you decide how much to offer. Bid too high, and you risk overpaying. Bid too low, and your offer may be dismissed without consideration.

Finding a House

Once your preparations are complete, it’s time to hit the market. Start by browsing listings online and talking with your agent about properties in your price range. Be ready to move fast on anything that interests you—but don’t let urgency cloud your judgment. Take the time to walk through each property and assess whether it truly offers good value.

It’s smart to go into the process with a firm maximum budget in mind—and stick to it. While you may be able to obtain assistance through a co-signer or a personal loan, remember that any borrowed money must eventually be repaid.

Some buyers have tried unconventional methods to gain an edge. Writing personal letters to sellers is one approach, though its effectiveness is debated. If you do write a letter, keep it respectful and not overly personal. Others have offered bonuses—such as TVs or vacation packages—sometimes arranged through loyalty programs or corporate discounts.

You Could Always Wait

Some buyers choose to wait, hoping the frenzy will settle down. Historically, real estate markets do cool off, and competition eventually eases. However, waiting has its risks. Home prices are unlikely to decrease significantly, and interest rates could rise again. If that happens, those who haven’t yet entered the market may find themselves priced out altogether.

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Buying a House: Monitor the Market

We’re not referring to the environment in terms of greenhouses or acid rain—although you do want a house that meets environmental standards. We’re talking about monitoring the housing market. Is it a seller’s market or a buyer’s market?
You might wonder how this affects your decision to buy a house. The answer is simple: buying a home in a competitive market could lead you straight into a situation where supply is scarce and interest rates are unfavorable. You’ve likely heard investment experts claim that real estate goes through cycles—boom and bust, dirt cheap versus pricey. When demand for housing outpaces supply and builders can’t keep up, lenders seize the opportunity to charge exorbitant mortgage rates.

Real estate was thriving until a year or two ago. Millions of apartment dwellers became first-time homeowners, interest rates were low, and the construction industry was bustling. In the last two years, that frenetic pace has subsided, and the housing market is beginning to stabilize. Interest rates are inching up, and we may soon witness house prices coming down from their exorbitant levels. However, when that will happen is the $64 question, as predicting real estate trends is as tricky as predicting the stock market. Only a fool would waste time speculating.

Still, it pays to monitor the market because the economy will, to some degree, dictate whether now is the right time for you to secure a mortgage. Next to marriage, mortgages rank among life’s biggest anxiety triggers. Many of us have agonized over the question: “Are mortgages larger than life?”

In a way, they are. But with intelligent planning, you can avoid the common pitfalls of buying a house—especially if it’s your first time and you’re feeling a bit overwhelmed.

Buying a House: Going Solo or Seeking Help?

If you’re planning to buy a house on your own to avoid the hefty commissions charged by most real estate agents, we commend your independence. Just remember to do your homework, check your facts and figures, and double-check them. Before you take the plunge, familiarize yourself with some real estate lingo; like any industry, real estate has its own specialized vocabulary. The terms used in mortgage documents and contractor agreements can be confusing, especially for first-timers. Take it from us: you’ll go through quite a paper chase as your negotiations unfold.
Many prefer to pay commissions to transfer some of the headaches associated with buying a house to an agent. Most people feel more confident trusting someone with experience, savvy, and connections in real estate. Those buying a house for the second or third time often return to an agent, especially if their initial experience was hassle-free. Many swear by the advantages of using a real estate agent, who has an extensive network of contacts, access to MLS listings and databases, and the ability to foresee potential problems in the home-buying process. Experienced agents can quickly assess whether the seller’s asking price is realistic or inflated and whether your budget allows for your desired type of house.

One last note: there’s a common belief that real estate agents are only out to make money for themselves. While there have been instances that support this, most real estate agents take their jobs seriously. They work hard and genuinely enjoy what they do. They must complete a course, pass an exam, and often sacrifice weekends and holidays. Becoming a real estate agent involves a combination of brain work, hard work, and sometimes, luck. They encounter both good and challenging clients.

Buying a House: Think “Mortgage”

No mortgage, no house. That’s the long and short of it—unless you have a suitcase full of cash and don’t need to deal with banks. A few fortunate people can pay in cash, but the majority of us rely on mortgages. By the time buying a house becomes a full-fledged decision, a mortgage often becomes a constant presence in our lives.
It’s best to address mortgage issues right away.

First, meet with your bank to get pre-approved. Some builders and agents may take you only half-seriously if they find out you haven’t been pre-approved for a mortgage. The bank will ask you a series of preliminary questions:

• Your income and that of your spouse
• The mortgage amount you wish to borrow
• The amount of down payment you’re willing to make
• Your debt profile (lines of credit, student loans, car loans, credit card balances, etc.)
• Your credit score
• Your monthly expenses in relation to your earnings
• Any other information the bank may need to determine your eligibility

To avoid overwhelming you as a first-time buyer, we should warn you that the bank may request additional documents. During your meeting, you may also want to discuss mortgage insurance (usually required if your down payment is less than 15%-20% of the total mortgage loan), making extra mortgage payments (if you want to pay off the mortgage sooner), and getting a co-signer.

If this isn’t your first time but your second or third, consider discussing the pros and cons of renewing your existing mortgage or whether you should apply for a second mortgage for a vacation home or retirement condo.

House to Buy or Build from Scratch?

Once you have your mortgage details sorted out and building a house from the ground up has always been your dream, dedicate some time and energy to selecting a reputable home builder. Many people prefer not to settle for pre-fab or turnkey houses; they want to put a personal touch on their homes by selecting materials and fixtures rather than accepting the builder’s choices.
When selecting a home builder, ensure they are licensed by the city or state government. Check their reputation; if they come highly recommended, it will provide peace of mind compared to choosing from the Yellow Pages. Read their contract carefully, scrutinizing the building schedule to ensure they deliver on time. For example, if they promise to complete digging, laying pipes, and building the foundation by week 3, verify they’re on schedule. Delays can lead to significant headaches.

If you’re buying an existing home, obtain appraisals regardless of when the house was built. The same rule applies when purchasing a condo. Be vigilant about structural deficiencies.

Moving In? Congratulations!

So, the house is finally yours, and the moving truck just dropped off the remaining boxes. Wonderful! This is an exciting time, and the thrill of buying a house doesn’t fade on moving day. On the contrary, your agenda planner will now be filled with a “to-do” list that seems endless.
For instance, your activities will shift. Are you considering stripping the old paint and applying latex? Not a fan of the previous owner’s carpets and want hardwood floors instead? Where can you find hardwood at a good price? If you have young kids, perhaps investing in a home alarm system is a wise idea!

Oh yes—there will be tasks to keep you busy for a lifetime. A house is just a house, but with your efforts and TLC (tender loving care), you can transform it into a stunning home for your family to enjoy for many years to come!

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• Are you in a stable relationship that has been ongoing for several years, with a new addition expected soon?
• Are you tired of spending money every month without seeing any returns?
• Do you feel frustrated when you think that all the money you pay in rent is helping someone else to make money on their property investment?
• Have you thought about how much you would like to make your living space reflect your own life, not only in décor but also in design?
• Are you looking for a stable investment that you would like to mature over time?

If you answered yes to any of the above, you might want to consider getting into the real estate market by purchasing your first home.

Purchasing Real Estate

Most of us purchase our first piece of real estate for practical reasons. Many of us do so because we are starting a family, and some just to have something that they can call their own. Buying a house is the most expensive purchase most people will ever make in their lives, so it is necessary to approach the purchase of your first house with a lot of caution. This first investment can make or break your financial outlook well into the future, and maybe throughout your whole life. If that sounds scary, well, it is! But if you are properly prepared and willing to listen to advice, then all should go well and in a few years you will find that your first investment worked out nicely. Here are some tips when you are looking into buying your first home

Don’t neglect the preliminaries!

There are a lot of steps that need to be taken before you start looking at homes. The following preliminaries are essential in determining what type of home you will need to look at in order to make your dream of ownership a reality.

• Make sure you are ready! Buying a home is a huge financial commitment, so you need to be prepared to pay more every month than you do when you are renting. Don’t just consider the price of a home; also consider the costs of getting to and from your place of work, the future needs of your family, and the cost of repairs.
• Find a good realtor. Realtors are a dime a dozen, but just like any job, only one in every four is really good. Taking care when selecting a realtor will help you avoid any pitfalls, and an experienced realtor will have a lot of contacts to help you get set up for the other preliminaries.
• Check your credit rating. Your credit score is going to be a huge factor in your mortgage, so check it before you start shopping so that you won’t get any nasty surprises. If your score is bad, immediately begin taking steps to repair it.
• Start saving. A good down payment will be key in avoiding a large mortgage. The longer you can save, the more money you can put down. You may also want this money to furnish or make repairs to the new home.
• Get pre-approved. Pre-approval will give you a good idea about how much money you will be able to spend on a house. Having a dollar amount ready up front will help you narrow your search.

Looking at houses

The best part about buying a home is looking at the assortment of houses within your price range. It can also be a real eye-opener when it comes to the impact of location on a home’s value and the amount some people think they can get for their houses. Here are some things to consider while you look.

• Is the house in good repair? Inside and out, the house should demonstrate that it has been looked after. If there are visible problems such as peeling paint, holes in the walls, even unclean conditions, it may be a sign that there are problems that go underneath the surface. If the current owners can’t look after the small stuff, there is no reason to believe they are looking after the big stuff, like pipes and heating.
• Is there enough room? Don’t just consider the current size of your family here. You will also want to look at any future additions, as well as what your kids may need in terms of living space as they grow up. Houses with a lot of room to expand are also a good idea, so the actual plot will be important.
• What kind of limitations are placed on the property via zoning and neighborhood laws? Many people are surprised to find that there are different zoning laws in different neighborhoods. These laws are important as failing to obey them can mean substantial fines. For example, if you run a business out of your home, you will want to be sure that zoning allows you to do so and that you can receive clients. Beware of properties with easements; just because they have sold in the past does not mean they will sell in the future!
• Be aware of your own limitations! First time home buyers are often overly optimistic about their abilities to improve their houses. They will go for fixer-upper properties in order to substantially increase the value. This can be a mistake, especially in today’s busy world. If you have a good record of getting things done in the past, by all means by an improvement house. If you are busy with work and kids, though, it might be best to spend a little extra on a home that is completely finished.

Closing the deal

A lot of the time, people will just know when they find the house that is perfect for them. It is here that your realtor’s expertise will come in the most handy, as they can help you when it comes to negotiating price and what stays with the house. You should also consider getting the home inspected before you sign the papers, so that you will not receive any nasty surprises. Keep all the documents pertaining to the sale in a secure place for future reference; often, your lawyer or notary public will keep records as well.

Buying a home can be a lot of fun, but never forget that it is a major investment. Take your time and don’t fall into any common first home buyer traps!

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Getting Bids and Estimates

Building a home is a huge undertaking, so even if a builder comes highly recommended, it’s important to get bids from at least three firms. Read each bid carefully and pay attention to the fine print. If one bid is significantly lower, it may not include important aspects of the project, or it could indicate a company that isn’t fully reputable.

Consider having a lawyer review the bids, especially if this is your first time building a home. A lawyer can identify potential problems before they arise.

Also, ensure you understand the difference between an estimate and an actual bid. An estimate is often based on guesswork, though experienced builders can provide fairly accurate ones. However, keep in mind that final costs could differ from the estimate.

Qualifications

Before choosing a builder based on their bid or estimate, verify the company’s qualifications. While it may feel awkward, always ask for proof of certifications and licenses. Builders invest in these credentials to prove their professionalism and reliability.

Start by checking the builder’s state licenses. Ask about their liability insurance and workers’ compensation coverage as well. Hiring unlicensed or uninsured builders could make you liable for accidents on the job site, potentially derailing your project. You can also check with the local Home Builders Association to see if the company is a member.

It’s also wise to verify the builder’s business address and phone number. Visit the company’s office, meet the staff, and examine the premises. A reputable builder will have a brick-and-mortar office, not just a cell phone for contact.

Don’t hesitate to request references, either. Get contact details from past clients, and take the time to follow up. Ask about their overall experience, any problems they encountered, and how the builder handled them. Finish by inquiring about their satisfaction with the completed home.

Before you make your final choice, check with the Better Business Bureau for any complaints. A few complaints are normal, especially for long-established companies, but a builder with multiple complaints per two years of operation should raise red flags. Additionally, check with your city’s building department and the county clerk to see if any legal issues have been filed against the builder.

Making a Final Choice

Once you’ve thoroughly researched a builder and accepted a bid, be sure to get a formal contract. Before signing, consult a lawyer to review the contract carefully.

Make sure you’re satisfied with the terms before you sign. You can renegotiate terms before the official agreement, but once you sign, the contract is binding.

Cost and project duration are key concerns. Building a home is a major undertaking, and unexpected problems can arise, resulting in extra costs or delays. Be sure to ask your builder if they typically go over budget, as this can be another important factor to investigate through references.

Building your dream home can be exciting, but it can also present challenges. By carefully choosing a qualified, trustworthy builder, you can avoid unnecessary stress, and the process will go more smoothly. It’s worth the effort!

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While the thought of buying a newly built home is appealing, it’s a simple fact that the majority of homes sold in the U.S. and Canada are “existing” or “older” homes. In fact, statistics show that around 95% of homes sold in the United States each year are existing home sales. So unless you’re part of that small 5% minority, you’re likely buying an older home.

For many buyers, purchasing an existing home can be a smooth and rewarding experience, especially if the home has been well maintained both inside and out. Homes are built to last, but without regular upkeep, it’s surprising how quickly things can start to go wrong. More on that in a moment.

Key Considerations When Buying an Older Home

Lot Size
Many of the new subdivisions and communities being built today often try to maximize space by cramming as many homes as possible into a small area. While the homes themselves may be a good size, this usually means the lot is tiny or even non-existent. However, this isn’t typically the case with older homes in established neighborhoods, where lots tend to be more generously proportioned, giving you more outdoor space and privacy.

Established Neighborhood
Older homes are usually found in well-established neighborhoods. This means you’ll benefit from being close to schools, grocery stores, public transit, recreational facilities, and all the services you expect—such as mail delivery, garbage collection, and more.

The Drawbacks of Older Homes
While all of this sounds great, older homes do come with their drawbacks. As mentioned, if the home has been well maintained, you’re less likely to encounter issues. However, no one can guarantee this, and there are more factors to consider with older homes than with new builds. This is why it’s even more important to have a professional home inspection before buying. Some potential issues could include the following:

The Structure
Is the home structurally sound? You should get a good idea of this just by looking around. Large cracks in corners could indicate that the building has shifted or settled. If the foundation has cracks or holes, this may be harder to spot unless you have an unfinished basement to inspect.

Damp Issues
If there’s damage to the foundation, there could be a damp problem. Water may have been leaking into the walls over the years, which can lead to mold and health issues, not to mention structural damage.
Dampness can also arise from the exterior—if eavestroughs or downspouts are broken, rainwater might be flowing back into the house instead of being diverted away.

Windows and Doors
If the windows and doors have been recently replaced, that’s great! But if they haven’t, older homes are notorious for having drafty windows and doors that let in the cold, resulting in higher heating costs. You’ll need to factor in the cost of replacing these if you choose to buy the house, or consider whether you’re willing to live with the added heating expenses.

The Roof
Roofs don’t last forever. Unless the shingles were replaced in the last few years, you’ll need to inspect them to see how much life they have left. And, if the roof has been leaking for a while, you’ll want to check the roof structure itself. The plywood beneath the shingles could be rotting and may need replacing.

Electrical and Plumbing
In older homes, the electrical and plumbing systems may not meet today’s safety standards. If you have an old fuse box, check whether it’s overloaded or if there’s space to add extra circuits. What’s the system’s rating?

As for plumbing, while older pipes may still be in fine condition, problems can arise when previous owners have made alterations. Ideally, you want to buy an older home where both the electrical and plumbing systems have been updated.

Hot water tanks fall under plumbing as well. While not typically expensive to replace, the damage caused by a leaking tank could be costly.

Furnace
Replacing a furnace can be quite expensive. Although furnaces are designed to last a long time, if the one in the home you’re considering is more than three decades old, it’s worth considering the possibility of needing a replacement soon. A furnace that has been regularly serviced will likely last longer.

Asbestos
Asbestos is a concern when buying an older home. While it isn’t a daily problem, it becomes an issue if you plan on doing any renovations. In the U.S., asbestos products were banned in 1978, and in Canada in 1979. However, some builders continued using pre-ban asbestos products well into the 1990s, so it’s crucial to get the house checked for any materials that may contain asbestos.
Learn more about asbestos risks.

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