Archives for March 2018

Should You Buy A Home For Your College Kid?

Should You Buy A Home For Your College Kid?

If you’re about to send your child to college, you’re undoubtedly suffering from sticker shock. And it’s not just from the cost of tuition and mandatory fees and books and a meal plan and parking, but also from housing. Maybe, especially, from housing. The mouse – hole your dorm – bound child will live in for at least the next year come August or so might as well be the Taj Mahal for what it costs to shelter them in much less extravagant environs.

The high cost of student housing – not just in the first year when they are typically living in on – campus housing – is just one of the reasons people are increasingly looking to purchase property for their college kids to live in. Is this a consideration for your family? We’re breaking down the particulars.

Financial savings

Yes, it may be that buying a property for your college kid to live in is a smart financial decision. “Average prices per year for housing are more than $9,000 in college towns,” said U.S. News & World Report. “In highly desirable college towns outside major cities, housing costs can be much higher. Monthly housing prices in Berkeley, California, home of the flagship of the University of California system, can reach more than $3,000, making the price tag for the academic year more than $27,000. In Cambridge, Massachusetts, outside of university – rich Boston, the four – year price for housing can exceed $100,000 as well.”

If that has you getting ready to search for homes for sale RIGHT THIS SECOND, “Don’t forget to factor in the additional costs of homeownership besides the mortgage, like maintenance expenses, homeowners’ association fees, insurance and taxes,” they said. You may find that buying a home doesn’t make as much financial sense as you think.”

Tax savings

You can enjoy a tax write – off on a second home, which could make a college town purchase much more affordable in the long run, but you have to be careful about how the property is used and the way it is reported on your taxes. “Many homeowners look forward to purchasing a second home that can be used for vacations, rental income, investment purposes or as a primary residence during retirement. Current tax laws offer several tax breaks that can help make second – home ownership more affordable,” said Investopedia. “If you already own, or are thinking about purchasing a second home, it will be in your best interest to understand the tax breaks and how they work. Different tax rules apply depending on how you use the property, for either personal or rental use, or a combination of the two.

As long as you use the property as a second home – and not as a rental – you can deduct mortgage interest the same way you would for your primary home. You can deduct up to 100% of the interest you pay on up to $1.1 million of debt that is secured by your first and second homes (that’s the total amount – – it’s not $1.1 million for each home).”

That would mean adding rent – paying tenants/roommates to the mix would be off the table. Keep in mind also that you can deduct property taxes on a second home. You will want to talk to your tax advisor about the tax situation in the state in which you are considering making a purchase.

Appreciation

Is your child attending college in an area that is appreciating nicely? It might be a good investment to purchase a property that you can sell after graduation for a nice profit, or hold onto for passive income by turning it into a rental for future college students.

Depreciation

Then again, there is the chance that entrusting your child, and your child’s future roommates and friends, with a property you own could spell financial disaster if the home is not maintained. Worried about college parties that trash the place and/or illegal activities like drug – taking in the home, which could endanger your child’s future? If you’re thinking about buying a property for your child (and possibly other people’s children as well) to live in, you need to have an honest conversation with him or her, and with yourself, about the responsibilities involved. Is your offspring responsible enough to make smart decisions and properly care for a home?

To roommate or not to roommate

There are additional questions and potential concerns around the roommate issue. Yes, allowing your child to live with friends will provide companionship that is important for college students and will cut down on your monthly costs – and perhaps even provide some monthly income. But consider these questions from Bader Martin:

“If your child will have roommates, how much do you plan to charge them and can they be depended upon to pay their share of the rent on time each month? What will you do if a roommate – renter moves out and how long are you willing to carry the mortgage without replacing the roommate? And will your child and roommates occupy the property all twelve months of the year or only during the school year? What are your potential liabilities if a roommate is hurt on the property or loses personal possessions in a robbery or fire? Are you adequately insured?”

Retirement strategies

Individual real estate markets differ widely, and what seems like a good investment in one city may be totally undoable in another. Having an alternate or future use for the property in question can tip the scales. In some cases, parents purchase a condo or townhome in the city for their college student child to live in, with the intention of keeping it in the family for the child post – graduation, for another child intending to attend the same college, or even as a place for themselves. Another growing real estate trend has parents following their child to the city in question as part of their retirement plan.

“Increasingly, parents are also considering the move as part of a long – term plan in which they also participate,” said U.S. News & World Report. “If your child goes to school in a city whose lifestyle and cultural offerings are pleasant to you as well, why not retire there? Schools from Berkeley and Cambridge to Chapel Hill, North Carolina, and Bellingham, Washington, can be pleasant places to retire. The property you purchase could thus be part of your long – term retirement strategy.”

Stability

Having to find a new place and move every year, find storage, and put down new deposits is a drag for anyone. Buying a home that your child can live in for his or her entire college experience provides stability as well as a fixed expense they (and you!) can count on.

In – state tuition

If your child is attending college out of state, you’re being hit with even higher expenses. “About 17 percent of students attend college out – of – state, and they pay dearly for it,” said Parenting. “The typical out – of – state tuition rate at a four – year public university is three to four times more than the in – state rate.”

For this reason, parents often explore options for in – state tuition, like purchasing a property – but with varying success. “Most states have established residency requirements designed to prevent out – of – state students who become residents incidental to their education from qualifying,” said FinAid. Buying a home in the state is a good start, but likely won’t be the only commitment that needs to be made in order to get that elusive in – state tuition. It’s a good idea to learn all you can about the requirements for the school and state in question before making a purchase for this sole reason.

Source: Buying Tips

Defective Home: Who Is Responsible?

Defective Home: Who Is Responsible?

Question: My son and his wife purchased their first home last year. They secured a mortgage with a lender (Note: I have deleted the name of the lender). They had looked at 5 others houses where the lender was overly critical about updates to the houses before they would give out a mortgage. The house my son and daughter-in-law agreed on and purchased had a beautifully terraced backyard. They were required to do minor fixes before getting the mortgage. Eight months later the deck is coming away from the house because the terraces were put in wrong. My daughter in law went to the town to read the permits and have the contractor come back. No permits were pulled and a repair bill of $50,000 was given by a new contractor and structural engineer.

Who is at fault? The previous homeowners, the lender or the home inspector? This is a major bill for a first time buyer and no one seems to be responsible. Thank you for your help. Lori.

Answer: Dear Lori. I know that lenders are supposed to look carefully — and critically –at the appraisal of a house they are considering making a mortgage loan, but I am surprised your son’s lender actually turned him down based on the condition of the houses.

Let’s look at the various players. First, the home inspector. Did he/she inspect the deck and say anything about it? I can’t provide you specific legal advice, but you may have a case against that inspector. I would call him and tell him that there is a problem and you want him to look at the deck. Don’t make any accusations or allegations; let the inspector take the lead in making comments. Many states protect the inspector from litigation if the homeowner has signed a statement at the back of the inspection report that states: “in the event of an error or mistake by the inspector, his/its liability is limited to the amount of the inspection”. This is called an “exculpatory clause”. However, many state courts have taken the position that if the homeowner can prove negligence on the part of the inspector, the inspector cannot use the “shield” of the exculpatory clause as a defense.

Next, the seller. Did your sales contract state that you were buying “as is”? If that’s the case, you may not have a case against the seller. And even if you did not take “as is”, I know that the seller will use as a defense “you had an inspector; if there is a problem, he should have caught it. However, if the seller knew that the contractor did not get permits for the work, you may still have a case.

Next, the lender. Generally, lenders are not responsible for problems in the house. However, in your case, it appears that the lender was actively involved in your house purchase. It was critical about other houses that were being considered, and regarding this house the lender actually required certain repairs to be made before the mortgage could be funded. So, I would think that you may be able to hold the lender responsible for some of the repairs costs.

Next: what about the contractor that installed the deck in the first place and did not pull any permits. Generally, there is a period of time (called a statute of limitations) after which you lose the right to file suit. However, there is also a legal concept called “the discovery rule” — the statute of limitations starts when the problem is first discovered.

My suggestion: do your homework, get at least one more bid from a contractor and talk with a local attorney about the feasibility — and the cost — of litigation.

Source: Buying Tips

Home Buyers Should Know If The Seller Is Listening

Home Buyers Should Know If The Seller Is Listening

Imagine that you are the buyers’ agent and that you are just finishing showing them a house that, obviously, they feel is perfect for them. As you stand in the foyer talking, they begin to discuss making an offer. The three of you talk about financing and negotiation strategies. They emphasize that, although they could and would pay full price — even more! — they want to start with a lower offer. You may even agree with them, and you start talking about various alternative scenarios. Etc. Etc. All is good, right?

Now suppose that, unbeknownst to you, the seller has recorded your entire conversation and all the remarks made during your tour of the home. Both audio and visual. Not so good after all, right?

As technology evolves, and as houses get smarter and smarter, homeowners have and use expanded opportunities to know about whatever is going on in their homes when they are not physically present. Buyers, agents, and others who may have legitimate access to a house need to be aware of this and to act accordingly. Sellers, on the other hand, would love to have access to these kinds of conversations, but they need to be careful about liabilities.

Paragraph 10 of the CAR (California Association of REALTORS®) standard residential listing agreement says this: “Persons visiting the Property may not be aware that they could be recorded by audio or visual devices installed by Seller (such as ‘nanny cams’ and hidden security cameras). Seller is advised to post notice disclosing the existence of security devices.”

This language was added to the standard form agreement June of 2017. It appears in a paragraph that previously addressed security concerns. It is a safe bet that a significant number of agents are not aware of, and therefore don’t point out, the advice about posting and disclosing the presence of security cameras and/or recording devices.

To understand why the seller is advised to provide notice of recording devices, we need to be aware of California’s privacy law at Penal Code §632. It says, in part, “A person who, intentionally and without the consent of all parties to a confidential communication, uses an electronic amplifying or recording device to eavesdrop or record the confidential communication …shall be punished by a fine not exceeding two thousand five hundred dollars ($2,500) per violation, or imprisonment in a county jail not exceeding one year, or in the state prison, or by both that fine and imprisonment .”

Although the U.S. Constitution does not mention privacy (and isn’t that a surprise to many?) the California Constitution (Article I, Section 1) says that all people have an inalienable right to, among other things, “…pursuing and obtaining safety, happiness, and privacy.” The penal code reflects that. It says that Californians can’t expect confidentiality in public gatherings, or proceedings open to the public, or in circumstances where they can “reasonably expect” to be overheard or recorded, but otherwise they have an expectation of privacy and the ability to communicate confidentially.

The question then arises: What sort of notice should the seller give? Where and how should it be placed?

These matters were recently discussed in a webinar conducted by CAR legal staff. Of course, there is no one-size-fits-all answer. It was pretty clear that simply putting the notice in the MLS was not sufficient. Though it would be good as one step. Common sense — if it can be found — will probably provide the best answer from circumstance to circumstance. Certainly, the notice(s) should be prominently and clearly placed where a visitor to the property would be likely to see them.

Source: Buying Tips

12 Ways Buying New Construction Is Better, Worse, And Way Different From Other Homes

12 Ways Buying New Construction Is Better, Worse, And Way Different From Other Homes

Buying a new home isn’t the same as buying an existing home. The more you know going in, the more prepared you’ll be to roll with the process – or run from the process.

Everything all bright, shiny, and new

No one else’s taste, no one else’s floorplan, no one else’s germs. When you buy a brand – new home, it’s built for you and hasn’t been lived in by anyone but you.

Decisions, decision, decisions

There are those who love the idea of selecting the flooring, the cabinets, the kitchen countertops, the finishes, and the myriad other choices that need to be made when building a new home – and then there are those who get the shakes just thinking about it. If you’re the latter, perhaps an already – built home is a better option for you.

What you see is not what you get

Model homes are typically decked out with beautiful upgrades and multiple options, and those upgrades and options can cost big bucks. If you want your home to look like the model, be prepared to shell out far more money than what the base price of the house indicates.

You’ll have a warranty

“Warranties for newly built homes generally offer limited coverage on workmanship and materials relating to various components of the home, such as windows, heating, ventilation and air conditioning (HVAC), plumbing, and electrical systems for specific periods. Warranties also typically define how repairs will be made,” according to the Federal Trade Commission’s Consumer Protection site.

The duration of coverage varies depending on the component of the house. Coverage is provided for workmanship and materials on most components during the first year. For example, most warranties on new construction cover siding and stucco, doors and trim, and drywall and paint during the first year. Coverage for HVAC, plumbing, and electrical systems is generally two years. Some builders provide coverage for up to 10 years for ‘major structural defects,’ sometimes defined as problems that make a home unsafe and put the owner in danger. For example, a roof that could collapse is a ‘major structural defect.’

Home warranties are typically extendable after that first year, although you’ll be responsible for the cost.

You may have to buy sight unseen

In some cases, model homes may not be built – or only a few of the floorplans will be featured as models – and you won’t have an opportunity to walk through the homes to get a feel for how they live. You should have pictures and floorplans to view, and maybe even a virtual tour, but if you’re the type that needs to be in it to get it, you may be disappointed.

The noise – and the dust

When considering which home to buy, the location of the lot is obviously important. But have you asked about how construction is going to roll out in the neighborhoods? It could be that your home is on a street that serves as a main artery for trucks and other construction traffic. Or perhaps you’re in a location where construction is going to be going on all around you for months. Yes, the noise and dust will disappear – eventually. But how long are you willing to wait?

Don’t expect a price reduction

You may be used to negotiating on the price of an existing home for sale, but new home prices aren’t typically negotiable. The builder or developer may be willing to throw in some upgrades as part of the negotiation, but, the hotter the community, the less likely you are to get anything for free.

You can still work with your real estate agent

Working with an agent who is savvy in new construction will help get you the home you want and any available extras. Keep in mind that many new – home communities today offer real estate agents a commission for bringing in a buyer, but they insist that the real estate agent register their buyer on the first visit. So don’t show up alone to tour the community for the first time! You could cost your agent money and then have to navigate the purchase on your own.

It might behoove you to work with their in – house lender

If you’re already working with a lender, you obviously don’t want to be disloyal. But, there may be financial benefits to working with the builder/developer’s in – house lender. Many times, they offer a lower rate overall, will buy down your rate, or will offer you a “teaser” rate that keeps your payments lower for the first year or first few years.

Get familiar with this term: Standing inventory

If builders have pre – built homes that are waiting to be sold, this is the one place you may have wiggle room room on price. Another advantage of standing inventory is there is no construction wait, and these homes are often nicely amenitized with upgrades.

You might not be able to buy the lot you want

New homes are typically released in phases, and it might be that the lot you have your eye on gets snapped up by someone who was prequalified before you, or higher up on a waiting list if it’s a really popular community. Or, perhaps you want a homesite that isn’t set for release until later when you’re ready to purchase now. Flexibility is the key to being able to get what you want.

Amenities might not be available or built right away

If a community’s amenities are a draw for you, be sure to ask about when they will be built. It could be that the pool and community park you’re so excited about are years out from being realized.

Source: Buying Tips

Can You Pass The Flipping Personality Test?

Can You Pass The Flipping Personality Test?

“Ummm, I’m not sure about that countertop. Shouldn’t they be hiring someone to do that? I would do such a better job on that flip.”

Who hasn’t said that? When it comes to flipping, we all think we’d be naturals, right? Or at least more skilled than the novices who are fumbling through it on TV. But it takes more than big dreams and good intentions to execute a successful flip, and with so much money at stake, you want to make sure you do it right. Actually, you want to make sure you’re right for flipping in the first place before you put your financial future on the line.

Take the house flip personality test to make sure you’re a fit.

Are you smart?

No one’s really going to answer, “No,” to a question like this, but put it in the context of flipping. If you think it’s easy money and you aren’t really looking to put in the sweat equity or follow the basic rules of flipping, you might want to move along.

“Don’t believe those late-night infomercials that say you can get into house flipping with no money,” said U.S. News & World Report. “Nobody is going to hand you a house for free, and you can’t go to Home Depot and they’ll give you your supplies for free. If you are using credit cards and have no money, you can get into trouble quickly.”

Are you savvy?

Smart and savvy are not the same thing. Knowing where to save and where to spend is one of the most important factors when flipping.

Are you geographically desirable?

Buying a home just because it’s affordable and in need of renovation is not a great strategy. People actually have to want to live in the area where the home is located. Paying attention to hot areas can help you pinpoint the right spot.

“The market with the biggest increase in flippers last year was Buffalo, NY, which saw a 34% surge, according to a recent report from real estate data firm ATTOM Data Solutions,” said Realtor.com. The struggling upstate New York manufacturing town was followed by New York City, at 29%; Dallas, at 23%; Louisville, KY, at 22%; and Birmingham, AL, at 17%.”

Daren Blomquist, senior vice president at ATTOM, noted that, “These markets are not the primary markets that many people would think of [for] investing in real estate. “They’re more off the beaten path, so there’s less competition from other investors and there’s more availability for deals.”

You also need to pay attention to the home’s proximity to your home. Trying to manage a flip from afar is hard even for the most experienced investors.

Do you make it personal?

You may have the greatest personal style in the world, but, when it comes to flipping, you want to make sure you’re making the right choices to bring you the most money. Likewise, you may have your eye set on some specific updates and upgrades, but adding in what you want, and not what buyers are looking for, may make your flip a flop.

“Know which home improvements increase the home’s value,” said Money Crashers. “Focus on these projects first. Home improvements that increase the value of a home might include upgrading kitchen appliances, repainting the home’s exteriors, installing additional closet storage space, upgrading the deck, and adding green energy technologies. On the other hand, avoid home improvements that won’t increase the selling price, like installing a pool, installing a whirlpool bath, or adding a sunroom to the house.”

Can you roll with the punches?

Smart planning, extreme organization, and a great, trustworthy team are all crucial to a successful flip, obviously. But if you’re the type that flips out (literally!) if something changes, goes wrong, or looks like it’s all about to fall apart, this might not be for you. Flipping is a roller coaster, and there are going to be frustrations and setbacks along the way. Accept it, deal with it, and move on.

What are your goals?

Is this a get rich quick thing or are you thinking of flipping as a career? Are you interested in doing quality work or is it just about making the place look good and getting out? Being honest about your goals will help guide you throughout the process, but keep this in mind: cut corners and shoddy work may save you money upfront, but may impact your bottom line. And, if you plan to flip more than just one home, you don’t want to earn a reputation for sketchy work.

Do you play well with others?

Even if you’re the DIY King of North America, you’re going to need help somewhere, at some time. The best flippers have a contractor they can count on and assorted other trusted professionals for plumbing and electrical, landscaping, appraisals, title insurance, and so on.

Are you rich?

Flipping is going to cost you, even if you find the magical lipstick on a pig house. And many people underestimate the potential costs, from the down payment to the carrying costs if it doesn’t sell right away.

“To get a conventional investor mortgage, you often need at least 25 percent down, though a good mortgage broker might find other options, including a lower down payment or a loan that provides some money for repairs,” said U.S. News & World Report. “Hard-money lenders will lend to nearly anybody, but interest rates are high. Another major key to success as a flipper is accurately estimating both cost and timeline. That doesn’t mean there won’t be surprises, but you want to calculate the true cost of getting the property ready for sale. When you buy a home, you don’t always know what’s behind the walls: mold, asbestos, water damage, antiquated electrical lines, foundation issues or crumbling plumbing pipes.”

Source: Buying Tips

What You Should Know Before Deciding To Buy A Condo

What You Should Know Before Deciding To Buy A Condo

Condos were once thought of as homes that attracted singles or couples, often without children. But today, condos are growing in popularity and attracting families of all sizes.

Condos can be an excellent choice for the right buyers. Here are a few things that should be considered before purchasing a condo. Most buyers start with the condo itself. That may be a good place to begin but, before they buy, buyers should also consider other factors outside of the condo.

Some developers are building condos that have a look and feel like single-family homes. These modern condos have great rooms and open, flowing floor plans that look and feel like a single-family home rather than an apartment or condo.

One of the major attractions of condos is the low maintenance. The community area is maintained by an association funded by the dues that homeowners pay into it.

That’s why buyers’ first consideration should be to explore the development and make sure they like the look and feel of the complex and surrounding community. There are codes and restrictions, often referred to as CC&Rs (covenants, codes, and restrictions) that buyers will have to abide by once they purchase a condo. Buyers should ask to review them before making an offer to purchase a condo. These regulations help ensure that the community maintains its general appearance and any necessary repairs of the external areas.

Review the association’s budget. It may be necessary to get the seller to provide this information because it may not be released to a non-owner who is only a potential buyer. However, in considering buying into a development, it’s almost like going into business with the neighbors in the complex. It’s important to make sure that the association is running properly and has enough of a reserve for necessary expenses and maintenance. The budget and CC&Rs will give an idea about how stable the association is and if increases in the homeowners’ association dues are likely each year.

Find out how many owners in the development are delinquent on their dues. A condo complex that has a high level of delinquencies can cause problems for buyers when it comes time to get a loan or sell the condo. Some loans are not approved if delinquency rates are higher than 15 percent.

Review the minutes from the association’s board meetings. They will reveal the day-to-day issues that occur each month and give an indication of how the development is run. For instance, lots of complaints and filings about noisy residents, loud parties, or dog droppings on the lawn reveal potential problems with neighbors. The minutes will also reveal if the development is engaged in any lawsuits.

Understand what your responsibilities are for the upkeep of the condo. Find out what the association takes care of and what the homeowners have to maintain. Look at the association’s property management team and see how many times the association has changed management companies. Find out why. This will may reveal how responsive the association will be should residents need its assistance.

Ultimately, buyers need to ensure that when they purchase a condo they’re not buying into any legal battles the association is in the middle of and that they will be able to live in their condo the way they want. Study the CC&Rs and do due diligence before buying.

Source: Buying Tips

No Perfect Home Exists: What You Should Know About Home Inspections

No Perfect Home Exists: What You Should Know About Home Inspections

For many first-time buyers, buying a home can be a scary experience. They know they’ll be maintaining or improving a home with little to no maintenance experience, so the solution is to buy a home in perfect condition. So they hire a home inspector to point out all the flaws.

The problem is — no perfect home exists. Air conditioners break, plumbing pipes leak, and roof tiles blow off in the wind.

If you’re buying a home, start with a reasonable expectation of what home inspectors can do. Their job is to inform you about the integrity and condition of what you’re buying, good and bad.

A home inspection should take several hours, long enough to cover all built-in appliances, all mechanical, electrical, gas and plumbing systems, the roof, foundation, gutters, exterior skins, windows and doors.

An inspector doesn’t test for pests or sample the septic tank. For those, you need industry-specific inspectors.

Here’s what else you need to do.

1. Make sure the inspector you hire is licensed. The responsibilities of home inspectors vary according to state law and their areas of expertise.

2. Ask what the inspection covers. Some inspection companies have extensive divisions that can provide environmental for radon and lead paint. Be prepared to hire and schedule several inspectors according to your lender’s requirements and to pay several hundred dollars for each type of inspection.

3. Some inspection reports only cover the main house, not other buildings on the property. For specialty inspections such as termites, make sure the inspection covers all buildings on the property including guest houses, detached garages, storage buildings, etc.

4. Attend the inspection and follow along with the inspectors. Seeing problems for yourself will help you understand what’s serious, what needs replacement now or later, and what’s not important.

5. Don’t expect the seller to repair or replace every negative found on the report. If you’re getting a VA or FHA-guaranteed loan, some items aren’t negotiable. The seller must address them, but otherwise, pick your battles with the seller carefully.

A home inspection points out problems, they also point out what’s working well. It can help you make your final decision about the home – to ask the seller to make repairs or to offer a little less, to buy as is or not to buy at all.

Source: Buying Tips

Want To Buy A House? Here's How To Save For A Down Payment

Want To Buy A House? Here's How To Save For A Down Payment

Thinking about buying a house within the next 3 years? Or a bit farther down the road? Timing is everything and it turns out that simple question makes a difference.

According to Zillow, the median home value in Diamond Bar is $697,000. So how much of that should you put down? Down payments vary depending on the loan type, but in general they are:

*0% for VA loans
*3.5% for FHA loans
*20% for conventional loans
*Or use this handy down payment calculator to help you.

20% is the recommended down payment on a house.

You may have heard this before, but we’ll say it again. Try to put at least 20% down. Why? If you finance more than 80% of the home value, you will have to pay Private Mortgage Insurance (PMI). (But if you can take out a VA loan, PMI is not required.)

Even just 3.5% or $24,395 on a home in Diamond Bar, CA is a good chunk of money. And whether you’re fighting the good fight as a small business owner, still paying back those student loans, or just trying to save a bit each month like all of us, it’s hard to know what to do with that money you have managed to save. Which brings us to …

When are you looking to purchase a home?

1. I want to buy a home within 3 years.

If you’re looking to buy sooner rather than later, consider keeping your money in a cash account, like a savings account or something similar. Remember that savings accounts will yield greater interest than a regular checking account. You don’t want to invest this money for such a short period because of market volatility. Just think:

Imagine you’ve built up a decent amount for a down payment and you invested this money in the stock market. A recession comes and you take a 30% hit on your balance. That will likely prevent you from buying your home within your three-year goal.

2. I want to wait at least 4 years before buying a home.

If you’re not in a big rush, investing in the market might be a better option for you. Should you invest, do so with caution and don’t be too aggressive. Be smart, calculated, and balanced with your portfolio picks. Make sure you have a healthy mix of stocks and bonds. And keep in mind that you’ll want to rebalance your portfolio at least once a year. Why?

Imagine that you have a portfolio of 10 different stock and bond ETFs, or Exchange-traded funds. Each ETF is invested at a fixed percentage of your overall portfolio. As the year goes on, the allocations will wander from their targets. Those doing well will become a larger part of your portfolio. Those not doing so well will become a smaller part of your portfolio. When you rebalance, you bring things back in line with your target percentages, so you’re selling high and buying low.

Also keep in mind dollar-cost averaging, or investing a certain fixed amount on a regular schedule. Basically, you buy a larger number of shares when the markets are down and everything is at a lower price, and fewer shares when prices are high. This is recommended over making large, infrequent, lump sum contributions because it will bring the average cost per share down over time.

If these investing ideas are a bit daunting to you, you’re not alone! Speak with a financial planner to help you evaluate your options and navigate these uncertain waters. An advisor can be just the direction you need to reach your goal and buy a house.

David Yu, CFP® is a CERTIFIED FINANCIAL PLANNER with over 10 years of industry experience helping people make smart, lasting financial decisions. Visit www.pacunited.com for more information.

Source: Buying Tips