5 (Stupid) San Diego FTHB Mistakes That Cost You Millions in 2021
In this video I break down the incredibly stupid San Diego first time home buyer mistakes that will cost you tens of thousands, hundreds of thousands, and millions of dollars over the course of your lifetime - and, the longer you wait the larger the number gets.
In recent videos to you I have revealed the shocking benefits of owning versus renting, the best purchase home loans, explained what the agency adverse market adjuster is (which by the way, after push back, won't go into effect until December as of now), the 5 most asked housing and mortgage related questions I get, and if the 2021 housing market is just like 2007.
I want to be very clear - I call things as I see them from over 20 years doing real estate, loans, and investing, not only in San Diego, but several overseas locations as well. You might agree, disagree, or have different takes. Everyone has a different standpoint depending on different life factors.
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Without further ado - let's jump into the 5 (and plenty more) stupid mistakes first time home buyers make that cost them millions of dollars...
Stupid Mistake #1 - Being Scared Leads to Inaction (Analysis Paralysis)
I think this is best described by a recent conversation I had with someone, who's been on my website for several years, has been paying rent, hasn't be pre-approved for a mortgage, hasn't looked at real estate in person - yet, spends hours a day, everyday, looking online.
I asked him how much his average rent has been over 36 months - just give me a ballpark average.
He said it's about $3,000 +/- a month.
I said great - so far you have paid your landlord $108,000 - just in 3 years.
I then asked if he received any take write offs from renting - such as deducting his interest paid each year, his property taxes paid each year, and the mortgage interest he would have had.
He said no - of course not.
I relayed the video I just did on renting versus owning and laid out if he would have had a $700,000 mortgage, he would have been able to deduct about $36,000 per year x 3 years = $108,000 deducted from his taxes over that time.
I then asked if his apartment has appreciated in value at all over that time - he said, no, of course not.
I then said well if we take that same hypothetical $700,000 mortgage (or bought at $725,000 3 years ago) - and if he just received 5% appreciation over the last 3 years - that would put his new value at around $840,000.
Let's add that up I said.
He has paid $108,000 to his landlord versus his mortgage.
He has not received $108,000 in income tax deductions.
He has not received $115,000 in hypothetical appreciation over the last 3 years.
I asked him - how do you like your apartment?
He said - it's okay - not great.
My response was - why didn't you just buy an okay house instead?
Stupid Mistake #2 - Champagne Tastes on a Beer Budget
We all know what this means - you want a bottle of fine wine but in reality your budget affords a beer.
Guess what, join the club and get over it.
If you are renting a 2 bed/2 bath apartment for around $2500 - guess what - you can afford a 2 bedroom/2 bath bath condo of around $350,000.
But, don't forget being able to pay down your principal every month, getting great tax deductions, and, over time, looking forward to appreciation.
As something I have talked about, and make perfectly clear, real estate will go up, it will flatten out, it will go down - but, if history can dictate the future a bit - you should get a bit of appreciation.
Here's the most important moral of this - buy what you can afford.
Get into something as quickly as possible.
And be realistic with what that is.
Stupid Mistake #3 - Not Getting All of Your Ducks in a Row Now
Here's what I mean - you get pre-approved for your mortgage (including have all your needed supporting documents turned in), your know your max loan amount, you know your loan type, you know what you need for a down payment (if any), you know what your approximate rate is + and what your payments are, then you go look at as much real estate as possible, as fast as possible, until you find the one you want.
You make an offer, it's accepted, you move in 30 days later.
That's all it takes.
Stupid Mistake #4 - Waiting for Your "Dream Property" That Will Never Come
I absolutely hate all real estate reality shows - they drive me nut.
The favorite non sense phase everyone like to use is "I found my dream home."
When I lived in Panama, and met other expats, that bought a house, I would always hear "It's their dream house."
Get over it.
The dream house does not exist - especially if you are in San Diego, have a beer budget, and want to hop on the real estate train versus staying on the rental submarine.
Remember mistake #1?
Everyday you wait, and rent, is taking 5 times out of your pocket in the future.
Look at things in your budget, buy the one you like most.
Not harder than that.
Stupid Mistake #5 - Stupid Spending Habits
This one speaks for itself.
Huge car loans - I have no idea why someone with no home needs to spend $937 per month on a fancy car - which means he cant buy a house.
Huge student loans - guess what? Going to college is the biggest racket there is - unless you needed it specifically for a high paying job, or a specific profession, you got bamboozled.
Credit Card debt - Get several credit cards as early in life as possible. Just use them sparingly, get the credit limits increased, pay them off, and have low balances.
Pay your bills - I can't tell you how many times I see dumb mistakes on bills, paying a credit card late, getting a $50 t-mobile collection, letting parking tickets show up. Don't be dumb.
Bonus: Stupid Mistake #6 - "Saving" For a Down Payment
This one drives me nut - I reveal all in the video.
What do you think?
Did I miss any stupid things?
Leave me a comment below – or, contact me here.
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