Buying a starter home
Tuesday, October 31st, 2006
A common idea among first time buyers, and promoted by real-estate developers, is to buy a “starter home”. Typically, this is a smaller home with the possibility to add more rooms at a later date. Other variants on this is to buy this, and upgrade or exchange to a larger home when you need it.
In some cases, this could be a good option - you pay less to start with, you could improve when necessary or sell out and buy a larger property with your equity build up. In other cases, it may not be as good an option.
Typically, new homes are unfurnished; adding everything, starting from lino to curtains to furniture and fittings costs a fair bit. If you’re selling out after a few years, you may not recover the costs; and these may not be usable in a larger home. You do enjoy the benefits if you’re able to add rooms as and when required, but not if you’re trading up.
The second factor is that “starter homes” are the real-estate industry’s bread and butter; a developer can offer “new” together with financing, incentives and freebies especially in slow moving times. This could put pressure on your plans to sell.
The third factor is that renovation or additions at a later date can have a fairly high cost - much higher than doing it at start, or buying a fully developed property. Moreover, while the work is going on, it impacts your daily routine. Dust and noise aren’t exactly the nicest things to have in your home.
You need to factor in all these costs when you’re evaluating a starter home. Don’t be penny wise, pound foolish; you might save a little money now, and leave yourself open for a lot more trouble later.
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