Bidding wars: sellers love ’em, buyers hate ’em. How do you avoid them? Sometimes competing with multiple offers to win your bid on a “picture perfect” property is not the best money move. The truth is, the smarter money may lie with the ‘Ugly Duckling’ house that has good bones but won’t turn heads on Instagram – yet.
The Twin Demons of Inflation & Taxes
Michigan property taxes are based on roughly half of the assessed market value of a home. When you pay top dollar for a property, you’re also going to pay top dollar in taxes. That rising property tax also becomes part of your debt ratio. Pair this phenomenon with rising interest rates and before long you’re putting a dent into your potential Return-On-Investment. Maybe it’s a good time to take a deep breath and discuss different strategies with your lender and realtor.
A Savvy Strategy to Save
The old adage in real estate is that you make your money when you buy your home, not when you sell it. If you’re focused on growing your personal wealth through your real estate investment, a good strategy is to take emotion out of the equation, setting aside your idea of a dream home and instead looking for a diamond in the rough. Talk to your lender to develop your financing plan. For example, you may want to make a low, 5% down payment to reserve cash for improvements. You can then later have the home value reassessed to remove private mortgage insurance without having to refinance.
Good Bones Can Make Great Homes
Before you start to hunt the ugly duckling, draw up a list of your bare-bones ‘must haves’ and locations. Get a good home inspector and maybe even a contractor on speed dial. You’ll want to be able to act fast.
Now you’re ready to start your search with your realtor. Key signs a listing might not receive as much love as the “picture perfect” properties are poor photos, unfortunate paint colors, dated cabinetry, and a lack of staging. Beneath this lack-luster appearance there may be a wonderfully maintained structure with great mechanicals, just waiting for your loving touch to transform into a golden goose. With a little forethought and strategy, you can win the long game, and have a dream home that brings you joy while building your wealth.