How I Get Instant Equity On My Home Purchases
By: Jarod Dickson
Tags: Investing, Inspiration, Real Estate, Financial Freedom, Personal Finance

I've purchased two homes in my lifetime. The first of which I purchased when I was 23 years old. I've found myself speaking to many friends my age (late twenties) who are starting the home buying process themselves. They all come to me with a variety of questions, and I find myself giving the same advice to many of them—one of which I would like to share with you here.

If you’ve ever bought a home, you know the home buying process can be a very exciting process. You might hop on Zillow to look through the homes in your price range and dream about what it will feel like to own your own property. Since purchasing my second home about 2 years ago, I have found myself becoming a bit addicted to browsing homes online — it's kind of my thing now.

Going through the home buying process twice early in life taught me many things. I made a few mistakes, but I also made a few great decisions that I would like to share with you.

Like most home buyers, I wanted a great looking home with the features I desired in a great neighborhood. I think most homebuyers would say the same thing, but I also wanted to make sure I was making a good investment. In fact, not only did I want to make a good investment, I wanted to make an exceptional one. But how was I to go about that?

I knew I needed to try to find a good deal. I knew I needed to find a home that was priced below market value, so if I wanted to sell in a few years, I could make a bit of money when I did, but the real estate market where I live was red hot (and continues to be) so finding a great deal was no small task.

Everyone selling their home knew they could ask top dollar, and the crazy thing was, most of them got significantly more than what they were asking. I was new to the real estate game and didn't know how to become an insider — someone who knew what homes were hitting the market before they did so they could capitalize. Upon further investigation, I found out that most of these pre-market deals happed with cash transactions, and I certainly didn't have that kind of money lying around. That option was out.

The more time I spent browsing realtor.com the more I realized there was a common theme to the homes that would stay on the market longer than 2–3 days. They all were a bit dated, possibly had some underlying problems, or were just overpriced. I had no intention of buying an overpriced home, and I certainly didn't want to run into underlying problems, so I decided to give a little more attention to the homes that didn't look all that great.

I scheduled showings for homes that looked a bit run down or dated. I saw a lot of interesting properties — properties I would never purchase, but I also saw some homes that weren't all that bad.

What do I mean by not all that bad? Let me explain …

There were a lot of houses with pink bathrooms. There were many properties with orange shag carpet. There were a lot of homes that just plain smelled weird, but one thing I realized was that many of the weird smelling and dated properties were in pretty good shape.

Now, I am by no means a master carpenter. In fact, I never even took “shop” class, but one thing that I have always taken pride in is my ability to learn. This, coupled with the fact that I'm cheap and never want to pay a contractor to anything, I typically teach myself via YouTube and online articles to do most home and auto repairs myself.

I had good self-awareness, so I knew what projects I could handle and which ones were a bit over my head. I felt comfortable painting, replacing vanities, installing new light fixtures, refinishing floors, building fences, etc. I did not feel comfortable tackling extensive electrical issues, messing with foundation problems, repairing roofs, etc.

With this in mind, when I went to go see these run-down properties, I took a tally of the things I could and couldn't do. I would then analyze the price the seller was asking and see if the deal made sense. Mind you, both properties I have purchased were for my primary residence. These were houses my wife and kids would live in. They were not to be rental properties.

I also started noticing that these homes I started looking at typically had one thing in common.

They were owned by older people.

Now, there is something that I know to generally be true about older generations. While they may not have the most up-to-date style, they certainly know how to maintain their homes. They take pride in this maintenance, more so than my generation, it seems, and that pride in maintenance really shows. Again, many of these homes smelled a bit funny and were VERY dated, but they were structurally sound.

This correlation was a revelation to me and has lead me to talk to many peers about buying their first home. Of course, I talk to them about the financial responsibility of homeownership, but I also give them the biggest tip I could give a home buyer looking to have instant equity in their purchase …

Buy homes from older people.

You would be amazed how many home buyers can't see past pink walls, orange shag carpet, or a funny smell. If you’re able to, you’re putting yourself in a rare group of people, and you’re more likely to find a home that, with minimal work, will produce a fantastic looking property in great condition. Sometimes the extent of the work you need to do is just redecorate! Again, you would be shocked at what potential home buyers can’t look past. It seems everyone today desires a move-in ready home with new light fixtures and granite countertops.

If I could give you one piece of advice, it would be to look at a property through the eyes of an investor when you can. Of course, you may be buying a home for you and your family, so not everything needs to be about ROI, but when you’re able to look past what your fellow buyers can’t, you will find your way into a great situation.

By the way, the first home I bought I sold 4 years later for $50,000 more than what I bought it for (the original purchase price was just over $100,000), and the second home I still live in, but it was recently appraised for $35,000 more than what I purchased it for just a little over a year later.

Talk soon,

Jarod Dickson

www.millennialecon.com