You are in luck! Buying houses on a budget is something I have learned to do well. As a military wife, moving, buying a new house and setting up a home is something I have become good at over the years. I am taking a break from packing boxes to write this article. We recently celebrated our fifth anniversary at which point we had lived in 4 different cities in 3 different states; Texas, Virginia and California.Since we were married young, right after I graduated, budgeting and pinching pennies was something we learned quickly as we both got established in our careers. In the beginning we rented. The biggest thing we found was if done right one’s mortgage was so much cheaper. After that we bought both personal properties and rentals.
1). Buy a Fixer Upper
2 of our 7 houses have been foreclosure fixer uppers. In our first home, the former occupants had painted the house in rainbow colors throughout the entire home including one of the cabinets. The amazing thing was it was all cosmetic! With a lot of “sweat equity” it was cheap at 12k in repairs versus the 50k in comparable asking price savings! This allowed us to get into our “ideal” neighborhood at budget prices.
2). Distressed Property (Foreclosure/Short Sale)
I love these properties. While the paperwork is tedious, and short sales aren’t short; they can be amazing deals. I honestly love short sales more than foreclosures. In the past short sales have been a great deal, in better condition AND almost the same price as foreclosures. The “sweat” equity was in the waiting. While they both are disappearing rapidly as the recession becomes a distant memory; if you find one of the remaining “great” deals then snap it up.
3). Gentrifying Area
Buying in an up and coming area that is gentrifying is a great way to get to buy “low”. While we have not done this yet, as our orders have been in small town America, we have friends who have done very well in San Diego and DC.
4). Second Best School
We have done very well buying in the “second” best elementary school district. It has been significantly cheaper and still will be an awesome school for kids, resale and rental purposes.
5). Renting out Your Previous House
Rentals are not for everyone. We keep our previous homes as rentals and those have helped us fund the “upgrade” homes. Think of it this way: if your new mortgage on a house $1000 and you are able to rent it for $1600 then that is $600 in cash flow that you now have, plus the principle pay down of $200.Say your next house is $1800 for the mortgage. After your emergency fund you are only are really coming out of pocket for $200 plus someone else is paying off your loan! This allows you to capitalize on appreciation and get tax protection.