The standard homebuying advice is “only buy as much home as you need.” Makes sense, right? If a newly married couple is shopping for their first home, for example, a two-bedroom bungalow might be a smarter choice than a four-bedroom ranch house.
But you also have to consider another piece of standard homebuying advice: don’t buy unless you plan to live there for at least five years. If that newly married couple is planning on expanding their family, their two-bedroom bungalow might feel too small all too soon.
CNBC has a list of items potential homeowners should consider before making the big purchase, one of which is to think about the type of home you’ll need in the future:
Given that experts suggest you should only buy if you plan to stay in that home for several years, think about your must-haves now and in the near future: Do you need a garage? Do you want to be in a specific school district? You may also want to consider how close you are to amenities like public transportation, grocery stores and a hospital.
In other words: Don’t buy the home you can live with today. Buy the home you want to live in tomorrow.
This won’t necessarily mean a larger home, though you’ll want to consider the long-term impacts of the space you’re choosing to purchase. (If you take one of the bedrooms in that two-bedroom bungalow and your child gets the other, where do Grandma and Grandpa sleep when they visit?)
Yes, this home might be a little more expensive. No, it shouldn’t be so expensive that it breaks your budget. If you’re concerned about cost, remember that selling a home and moving into a new one is also expensive — and although you might make a profit on the sale of your home, you probably won’t make much of a profit if you haven’t lived there for at least five years.
The reason for this [five-year] rule is that closing costs and real-estate commissions required to buy and sell will consume 7 to 15 per cent of the cost of the house. Your home will have to appreciate up to the costs of buying and selling just to break even. If you want to make money, then the value must exceed those fees.
So don’t buy a home unless you plan to stay — and don’t buy a home unless it looks like it’s going to fit the life you plan to have five years from now.