Understanding Real Estate

Start with your own home.

For some people, stocks and bonds don’t feel as tangible as land, houses or apartments. But before you decide to become a landlord or a house flipper (both of which are riskier than you’d think, especially in this market), your first step should be working toward owning your own home.

True, with the down economy, many renters are currently in a stronger financial position than some recent homebuyers. But with prices and mortgage rates down, and a first time buyer tax credit in place, now might be the time to consider buying your own home.

Are you ready?

Start by looking at how much you’re paying for rent. Mint.com makes it easy to see where your money’s going, and with our easy ability to categorize and tag transactions, you can easily pull out precisely how much goes to rent each year.

With that total in mind, talk to your lender and see how much a home will cost, taking into account taxes, insurance, possible homeowners association dues and mortgage insurance. Next, put the difference into a savings account and see how it affects your budget. Again, you can model this before you start with Mint’s updated budget feature, which shows you instantly how changes you might make today would affect your financial health in the future.

Don’t try to time the market.

You may think the market’s hit rock bottom, but you never know. Just like it makes no sense to try to time the stock market, real estate can be equally tricky. The turnaround in prices is usually gradual, and you’re not going to miss out an instant spike if you hold off instead of jumping in because things look to be turning around in your area.

And don’t be fooled by the idea that you’re getting a discount. Just because a house that sold for $400,000 a few years ago is now $350,000 doesn’t mean is even worth that much.

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