“There’s such scarcity that the first thing that matters is finding a home you like,” said Jay Tuli, president of Leader Bank, which sells 90 percent of its home loans in Massachusetts.
Home sales are down year-over-year due to the lack of inventory, said Theresa Hatton, chief executive of Massachusetts Association of Realtors.
Many prospective buyers who were waiting for the Federal Reserve to begin cutting interest rates by now have reason to give up hope. Inflation isn’t coming down quickly enough and, at 3.5 percent, is still well above the Fed’s 2 percent target. So the central bank won’t trim short-term rates fast enough this year, contrary to what most economists had been expecting. Consequently, the 30-year fixed mortgage rate has risen to 7.1 percent, over 1 percentage point higher than this time last year and 0.6 percent more than January 2024, Freddie Mac reported last week.
“Until inflation cools a bit, we can expect mortgage rates to remain elevated,” said Michael Debronzo, a regional sales executive at PNC Bank, which has noted a slight uptick in loan applications.
The market is closely watching the Fed’s every move and the economy is a confounding puzzle even for experts. That will result in a volatile ride for the remainder of the year.
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With that in mind, here are three things for home buyers to consider, according to Berkshire Bank’s Ellen Steinfeld, head of consumer lending and payments:
Expect home listings to remain tight. That’s because those who financed their homes during the low-rate era are staying in their homes for longer. Even those who were looking to downsize are staying put. Financially, it doesn’t make sense to sell if you also have to buy at these rates. Usually, people try and sell their home before bidding on a new one, but right now it’s the other way around, said Steinfeld, who’s based in Long Island, N.Y.
This also means home prices are unlikely to drop. In certain cases people are paying more than the asking price, engaging in bidding wars. “I anticipate during the remainder of this year we’ll continue to see price appreciation,” Steinfeld noted.
Finally, even though interest rates will likely drop a smidge by late 2024, they won’t reverse anywhere as quickly as their speedy rise postpandemic. Meanwhile, buyers can do cheaper 3- or 5-year adjustable rate mortgages and refinance when rates drop.
“The cost of refinancing is reasonable enough,” Steinfeld said.
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In 2024, homebuyers can expect lower mortgage rates, higher home prices, and a lot more competition.
Hopeful buyers should start preparing as early as possible by saving money and paying down debt to improve credit scores.
Look into affordable mortgage programs and down payment assistance to boost affordability.
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After watching mortgage rates hit two-decade highs and inventory plummet last year, many hopeful homebuyers are eager to get off the sidelines and into a home.
While 2024 is expected to be a better year for the housing market in many respects, a lot of buyers are still going to struggle to find affordability. If you’re planning to buy a house this year, here’s what you need to know about housing market predictions in 2024, and how you can prepare.
Home price predictions 2024
Experts generally expect home prices to increase in 2024.
Low home inventory is a chronic problem in the US. This has generally kept home prices up, even as mortgage rates peaked near 8% and homebuying demand plummeted last year. Demand is expected to increase this year, so even if home prices were to drop in 2024, they likely wouldn’t fall enough to significantly improve affordability on their own.
Mortgage rate predictions 2024
Here’s where we’ll probably find more affordability in 2024: mortgage rates. Though they’re still relatively high, experts predict we’ll see mortgage rates go down in 2024. The average 30-year fixed mortgage rate is generally expected to end up near 6% by the end of the year.
Fannie Mae believes 30-year fixed rates could inch down to the mid-to-upper 6% range during the buying season — which typically lasts from spring through early fall — and reach 6.4% by the end of 2024
The MBA’s forecast is slightly less aggressive, predicting that mortgage rates could hover in the 6.3% to 6.6% range during the peak homebuying season before falling to 6.1% to close out 2024
NAR predicts rates will be in the mid-6% range for the homebuying season and drop to 6.1% in the last quarter of the year
Whether mortgage rates actually trend down in 2024, and by how much, depends in part on the path the Federal Reserve takes in its fight against inflation.
The Fed has indicated that it may start cutting the federal funds rate this year, which would remove a lot of upward pressure off of mortgage rates and allow them to fall more substantially. But inflation has remained a bit higher than expected in recent months, so we might have to wait longer for a Fed rate cut. This means mortgage rates might not fall in time for the peak homebuying season.
Will the housing market crash in 2024?
Because home prices have increased so dramatically in recent years, doomsayers believe that the housing market is in a bubble, and it’s only a matter of time before it bursts and the market crashes. But it’s actually pretty unlikely that will happen.
One of the main reasons we’re unlikely to see the housing market crash in 2024 has to do with housing inventory. The US simply does not have enough homes to meet demand, which is keeping prices steady.
Of course, no one has a crystal ball. If demand were to plummet, home prices could start falling. A severe recession could cause this to happen, for example. But even with a recession, it’s not a given that the housing market would crash as a result.
When will the housing market crash?
The fact is, it’s hard to predict a housing market crash. Right now, the conditions aren’t right for one — even though demand is low, supply remains even lower. And demand is expected to improve this year, while supply will likely remain a chronic problem for years to come.
What this means for 2024 homebuyers
If you’re hoping to buy a house this year, you’ll want to start planning now. This year is likely to be better for buyers than 2023 was in many ways, but it’s also going to be more challenging when it comes to prices and competition.
Lower mortgage rates will undoubtedly improve affordability for borrowers, but with that will come increased demand. This will keep home prices high and likely push them up even further. Finding a home in your price range may become even trickier, and you may need to make a lot of offers on homes before you get one accepted.
How to prepare to buy a house in 2024: 5 tips
Here’s what you should be doing now to prepare for homeownership in 2024.
1. Get your finances ready now
Because home prices are likely to remain high, you’ll want to take advantage of lower mortgage rates by making sure you get the lowest rate you can.
One of the faster methods to get your credit score up is to lower your credit utilization. This will also decrease your debt-to-income ratio, which is another factor mortgage lenders look at when considering what rate to give you.
J.R. Russell, head of direct to consumer mortgage lending at Citi Mortgages, says homebuyers should consider paying off credit card balances to improve their scores ahead of the 2024 homebuying season.
“If you’re trying to pay off or pay down some credit cards, start with the cards or credit lines with the highest interest rates first,” Russell says. “Then, pay off the balances that are smallest. The good news is that if you do this, you’ll improve your debt load and your credit score.”
2. Look for affordable mortgages and other first-time homebuyer assistance
The key to affording homeownership for many buyers in 2024 will be utilizing mortgages geared toward first-time homebuyers and combining them with grants or other forms of down payment assistance.
“If you’re not sure that your down payment will be sufficient, take time to understand all of the available products that you may be eligible for through the FHA or VA, your bank, or other local institutions,” Russell says. “These programs may grant you access to down payment assistance and low-to-moderate income programs, among other game-changing resources.”
Conventional loans allow down payments as low as 3%, while FHA loans allow 3.5% down payments. USDA and VA loans allow no down payment.
Look into lenders that offer special mortgage programs that come with additional assistance. Rocket Mortgage, for example, offers a ONE+ mortgage that allows borrowers to put down just 1%, with the lender providing a 2% grant.
Bank of America mortgages, another popular lender for first-time buyers, offers a couple of different forms of down payment assistance.
3. Time your purchase right
There probably won’t be a single “best time” to buy in 2024, because that depends on each buyer’s priorities — so it’s important that you figure out yours.
If getting the lowest rate possible is most important to you, you’ll want to wait until later this year to buy, possibly until the second half of 2024. But if you’re looking to avoid competition, buying within the next few months might be a better bet. Plus, you could always plan to refinance later on as rates drop.
4. But don’t rush
“If rates do start to moderate and the market does seem to become more favorable to buying in 2024, it will likely stay this way for a while,” Russell says. “If that’s the case, I encourage you to take your time! Don’t put pressure on yourself to make any potentially hasty decisions on what may be your biggest asset and the largest financial decision of your life.”
Though it’s still a while away, forecasts generally expect mortgage rates to continue falling in 2025. If you don’t feel ready to buy by the time the 2024 buying season rolls around, there’s nothing wrong with waiting a bit to continue saving and working on your credit.
5. Build your savings
Whether you’re padding your mortgage down payment savings or contributing to your emergency fund, tucking away some extra cash now is vital if you plan on buying a home soon.
When you buy a house, you’ll need enough cash to cover both your down payment and closing costs, which can amount to between 3% and 6% of the loan amount. While many mortgage programs allow low down payments, the more you can put down, the better your interest rate will likely be. Plus, offers with larger down payments are often more attractive to home sellers, giving you a competitive edge in what will likely be a tough market.
Homeownership is also often more expensive than many first-time buyers realize, especially in the first year. Having some extra money set aside for unexpected costs will help ensure you don’t go into debt when your first big housing expense comes along.
Housing market predictions 2024 FAQs
Experts expect mortgage rates to drop in 2024, and 30-year fixed rates could end the year closer to 6%.
There probably won’t be a housing recession in 2024 based on current expectations, as limited inventory is likely to push prices up further. Expect to see higher prices, lower mortgage rates, and more buyers in 2024.
In general, 2024 should be a better year to buy a house compared to 2023, but it will still be tough due to increased competition and higher prices.
On a salary of $40,000 per year, you can afford a house priced at around $100,000-$110,000, assuming you have some money — say, $10,000 or $15,000 — for a down payment and are not already carrying debt, such as a car loan or student loan. The number can change quite a bit when you factor in your specific numbers:
• Your debt
• Your down payment
• Your taxes, insurance (and homeowners association dues, if applicable)
• Your interest rate
• Your loan type
• Your lender
Understanding how these factors play into home affordability can get you closer to finding a home you can afford on your $40,000 salary.
What Kind of House Can I Afford With $40K a Year?
On a $40,000 salary, you want to get the nicest home you can. But what amount of home mortgage loan you qualify for depends on a number of factors, including your debt, income, interest rate, down payment, type of loan, and lender.
Understanding Debt-to-income Ratio
You may have heard that debt can seriously derail your plan to buy a house, but you might not know exactly how it does that. Here’s the scoop: A potential lender will calculate your debt-to-income (DTI) ratio by adding all your monthly debts and dividing that number by your monthly income.
Your DTI ratio determines how much home you can afford. If you have more debt, you can’t afford a bigger monthly housing payment, which means you’ll qualify for a smaller home loan. For example, if your total debt amounts are $3,000 each month and your income is $6,000 per month, your debt-to-income ratio would be 50%. This is well above the 36% guideline many mortgage lenders want to see. 💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
How to Factor in Your Down Payment
A down payment can also drastically impact home affordability. If you have a larger down payment, you’ll be able to afford a higher-priced home. With a down payment of 20% or more, you’ll be able to avoid the added expense of private mortgage insurance (PMI), which will in turn increase the loan amount you’ll be able to qualify for.
Try using a mortgage calculator to see how different down payment amount can affect how much home you’ll be able to qualify for.
Factors That Affect Home Affordability
To complete the picture of home affordability, you’ll also need to consider these factors:
• Interest rates A higher interest rate means you’ll qualify for a smaller home purchase price. A lower interest rate increases how much home you’ll be able to afford.
• Credit history and score You’ll also see that your credit score directly affects home affordability. With a good credit score, you’ll qualify for a better rate, which means you’ll qualify for a higher mortgage.
• Taxes and insurance Higher taxes and insurance can also affect home affordability. Your lender has to take into account how much you’ll be paying in taxes and insurance and include it as part of your monthly payment.
• Loan type Different loan types have different interest rates, down payment options, and credit requirements, which can affect home affordability.
• Lender Your lender may be able to approve you at a higher DTI ratio — some lenders will allow the DTI to be as much as 50%.
• Area The cost of living in your state is a top factor in determining home affordability. Price varies greatly around the country, so you may want to consider the best affordable places to live in the U.S. if you’re open to moving.
How to Afford More House With Down Payment Assistance
If you make $40,000, how much house you can afford also depends on what programs you’re able to qualify for. Down payment assistance programs can help with home affordability. These programs offer a grant or a second mortgage to cover a down payment. These programs are often offered by the state or city you live in. They may be restricted to first-time homebuyers or low-income borrowers, but these programs are worth looking into. Examples include Washington state’s Home Advantage DPA and Virginia’s HOMEownership DPA. Look for programs in your state, county, and city. You may also want to read tips to qualify for a mortgage. 💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.1
How to Calculate How Much House You Can Afford
There are some guidelines lenders use to qualify borrowers for a mortgage. Knowing how home affordability is calculated can help you understand what income you need to make and what debts you need to pay off to qualify for a mortgage. Lenders often follow the 28/36 rule, looking for a housing payment less than 28% of a borrower’s income and total debt payments less than 36% of your income. Here’s how to calculate it.
Back-end ratio (36%): The back-end ratio is your debt-to-income ratio. Add together all of your debts (including the new mortgage payment) to make sure all debts are under 36% of your income. If your monthly income is $3,333 ($40,000/12 = $3,333), your debts (including the mortgage payment) should be no more than $1,200 ($3,333*.36).
Front-end ratio (28%): With a monthly income of $3,333, this number works out to $933.
The 35/45 Rule: It’s possible to qualify for a larger mortgage based on the 35/45 guideline, which is used at the discretion of your lender. With a monthly income of $3,333, the housing allowance (35% of your income) increases to $1,167 and the total monthly debts (45% of your income) increases to $1,500.
An easy way to calculate how much home you can afford is with a home affordability calculator.
Home Affordability Examples
For homebuyers with a $40,000 annual income (a $3,333 monthly income), traditional guidelines of a 36% debt-to-income ratio give a maximum house payment of $1,200 ($3,333 * .36). Each example has the same amount for taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term.
Example #1: Too much debt
Monthly credit card debt: $100 Monthly car payment: $300 Student loan payment: $300 Total debt = $700 total debt payments
Down payment = $20,000 Maximum DTI ratio = $3,333 * .36 = $1,200 Maximum mortgage payment = $500 ($1,200 – $700)
Home budget = $54,748
Example #2: Low-debt borrower
Monthly credit card debt: $0 Monthly car payment: $100 Student loan payment: $0 Total debt = $100
Down payment: $20,000 Maximum DTI ratio = $3,333 * .36 = $1,200 Maximum mortgage payment = $1,100 ($1,200 – $100)
Home budget = $141,791
How Your Monthly Payment Affects Your Price Range
As shown above, your monthly debt obligations affect how much house you can afford. With a lot of debt, it’s hard to make a mortgage payment that qualifies you for the home you want.
It’s also important to keep in mind how interest rates affect your monthly payment. By paying so much interest over the course of 30 years, even small fluctuations in interest rates will affect your monthly payment. That’s why you see your neighbors scrambling to refinance their mortgages when interest rates drop.
Recommended: Home Loan Help Center
Types of Home Loans Available to $40K Households
There are different types of mortgage loans available for households in the $40K range:
• FHA loans: With Federal Housing Administration loans, you don’t have to have perfect credit or a large down payment to qualify. In fact, you can apply for a FHA loan with a credit score as low as 500.
• USDA loans: If you live in a rural area, you’ll definitely want to look at United States Department of Agriculture loans. You may be able to qualify for a USDA mortgage with no down payment and competitive interest rates.
• Conventional loans: For borrowers with stronger financials, conventional loans are some of the least expensive mortgages in terms of interest rates, mortgage insurance premiums, and property requirements. They’re backed by the federal government, and if you’re able to qualify for a conventional mortgage, it could save you some money.
• VA loans: For qualified veterans and servicemembers, the U.S. Department of Veterans Affairs loan is quite possibly the best out there. There are zero down payment options with great interest rates. If your credit is hurting, you still might be able to get a loan since the VA doesn’t have minimum credit score requirements (though the individual lender may).
The Takeaway
With proper planning, a salary of $40K should be able to get you into a home in many U.S. markets. However, you’ll want to make sure you keep a close eye on your credit score and save up for a down payment or find programs to help with one. Over time, the small, determined steps you take will lead you to your goals.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Is $40K a good salary for a single person?
You work hard for your salary, and a $40,000 salary for a single person is a good start, though it is below the median income for a single person, which is $56,929, according to data from the U.S. Census.
What is a comfortable income for a single person?
Comfortable depends on the cost of living where you live and your personal needs, but it can range from around $45,000 per year in Mississippi to $112,000 in Hawaii.
What is a liveable wage in 2024?
Your liveable wage depends on your area, working household members, and children. For example, it can range from $15.89 per hour for a single living in Beaumont, Texas, to $44.99 per hour for a household with three children in St. George, Utah.
What salary is considered rich for a single person?
A salary of $234,342 would put you in the top 5% of all earners in the U.S.
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SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Thinking of pursuing homeownership without a partner? You’re in good company. Singles are redefining what it means to be a homeowner while also becoming a growing segment in the home purchase market.
To delve deeper into the journey of buying a home on one’s own, Pennymac reached out to 500 single male and 500 single female homeowners across the United States. We wanted to uncover the driving forces and potential roadblocks of purchasing a home solo. Among our interesting findings? The majority of today’s single females believe that waiting for a partner to buy a home is an outdated notion.
Take a closer look at our survey results to find out how participants financed their homes, the role societal pressures played in their decisions and the biggest challenges they faced.
Single Homeownership Survey Results Highlights
Over half of respondents believe the idea of waiting for a significant other to buy a home is outdated.
55% of female homebuyers said their biggest challenge was finding a home in their price range, while 51% of male homebuyers said it was saving for the down payment.
67% of single homebuyers did not have financial assistance from family or friends with a down payment for their home.
70% of respondents did not feel societal pressure to buy a home.
65% of single homebuyers purchased their first home in the range of $0-$250k.
Single Homeowners Are Self-Reliant When it Comes to Down Payments
One of the biggest roadblocks for many first-time homebuyers is the down payment. A down payment is a portion of the total cost of a home that is paid upfront when the home is purchased. It typically ranges from 3% to 20% of the purchase price, depending on the lender and the type of mortgage.
While homebuyers sometimes use gifts from family for the down payment, most of our surveyed single homebuyers (67%) saved for it on their own and didn’t have any financial assistance from family and friends. How much did they save? The most popular down payment range reported by both male and female respondents was 6%-10%, with most individuals (65%) purchasing a home in the $0-$250,000 range.
Societal Pressure Is Not a Factor in Most Home-Buying Decisions
There are many reasons why people choose to buy a home, from the opportunity to build their own equity to reaping potential tax benefits. Our survey explored what specific factors drove the decision to buy a home as a single person — and our findings were insightful.
According to our survey, it’s not cultural norms, as 70% of respondents did not feel societal pressure to buy a home.
Half of these single homebuyers (50%), like many homebuyers, were simply ready to have a place of their own. Since 43% of respondents stated that they rented on their own prior to purchasing their home, they decided to make the leap to build their own equity. And with 36% securing a mortgage interest rate between 3.1% and 4%, they may have felt the timing was right to make the move.
No Partner, No Problem
Another interesting fact: Homeowners didn’t feel the need to have a partner to take this exciting step. The idea of waiting for a significant other to buy a home was deemed outdated by over half of respondents, with slightly more females (54%) than males (48%) agreeing it’s an old-fashioned notion.
They also want to put down roots. Nearly half of single homebuyers purchased their first home between the ages of 25 and 34, and 58% anticipate living in their home for nine or more years.
Different Genders, Different Challenges
Buying a home is a milestone, but it’s not without its obstacles. However, females and males identified different challenges as their most significant. More than half (55%) of females reported their biggest challenge when buying a home solo was finding a home in their price range, while 51% of males cited saving for the down payment as their number one hurdle.
Single homeowners are an important segment of the housing market. They’re saving for down payments, securing financing and bucking societal trends by not waiting for a partner to buy a home. They’re gaining the freedom, sense of security and peace of mind that comes from the exciting homeownership experience.
Homeownership is for everyone, not just couples. No matter your partnership status, Pennymac is here to help support you on your home-buying journey. Contact a Pennymac Loan Expert today to start your path to homeownership with confidence.
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Buying a home has been a struggle for many people in recent months. A big reason boils down to the combination of expensive rates for mortgage loans, elevated home prices, and low inventory.
Of course, these factors all go hand in hand. With mortgage lenders imposing higher rates on borrowers, current homeowners don’t want to move. Doing so, for many people, will mean giving up a lower mortgage rate and swapping it for a higher one.
But because people don’t want to give up their mortgage rates, housing inventory isn’t increasing. And because the demand for homes still exceeds the available supply, housing prices have risen.
In November, the National Association of Realtors (NAR) reported that there was a 3.5-month supply of available homes on the market. But is the inventory situation getting better? Unfortunately, that does not seem to be the case.
Housing inventory shrunk in November
The NAR says that housing inventory fell 1.7% in November compared to October. That’s not a good thing when buyers are so desperate to see the opposite happen.
Now, to give November’s 3.5-month supply of homes some context, it can easily take a six-month supply of homes to meet buyer demand in full. So November’s supply represents a notable gap. Unfortunately, until mortgage rates come down to a more moderate level, real estate inventory is likely to remain stagnant.
More: Check out our picks for the best mortgage lenders
Many homeowners locked in sub-3% mortgages in 2020 and 2021. It’s hard to make the case to swap a rate like that for a rate that’s above 6.5%, which is what the typical 30-year mortgage costs today.
How to cope with a low-inventory market
If you’re trying to buy a home, you may get tripped up by today’s low inventory. And inventory may not pick up for a while. So you may have to work with what you have.
One thing you should do is make a list of your top deal-breakers — but limit it to just a few things. You may, for example, say that you absolutely will not buy a home with less than three bedrooms. Similarly, you might say that two full bathrooms is the minimum number you’ll accept.
That’s totally fine. But try not to impose too many top deal-breakers, because in a market that lacks inventory, that could mean never finding a home that meets your needs. Instead, put those less-important items on your “less important” list.
For example, you may really want a home with a finished basement. But it could pay to designate that as a less important item. If you find a home with an unfinished basement, you can finish it as time and money allow. On the other hand, it may not be possible to add another full bathroom to an existing home without doing a major overhaul that involves running new plumbing and ventilation. To put it another way, finishing a basement might be a much less exhausting and expensive project.
We may not see real estate inventory pick up for quite some time. So as a buyer, your best bet may be to identify your top deal-breakers, but loosen up on other requirements.
Renting in Miami? Discover the 9 most affordable Miami suburbs for renters in 2024.
Miami is full of glitz, glamor and energy set against towering apartments, beachfront views and sunny skies. But living in the Magic City can mean a significantly higher cost of living unless you find one of the more affordable Miami suburbs.
If you’re new to the city, you may wonder how much rent costs in Miami. The average monthly rent is $2,297 for a studio, $2,730 for a one-bedroom unit and $3,372 for a two-bedroom unit.
If you’re searching for a more affordable place to call home that won’t break the bank, but still offers a taste of the Miami lifestyle, you’re in the right place. In this article, we’ll explore nine of the most affordable Miami suburbs. These places offer a more budget-friendly way to enjoy the South Florida sunshine and culture without the sky-high price tags.
Average rent for a one-bedroom: $1,575
Average rent for a two-bedroom: $3,000
Distance from Miami: 10 miles
Apartments for rent in Miami Springs
Claiming the first place on our list of affordable Miami suburbs is Miami Springs. This area is about 10 miles northwest of Miami, so you’re close to the city center. In Miami Springs, the average rent for a one-bedroom apartment is nearly $1,200 less than in Miami.
While a smaller town, there are plenty of places to check out in Miami Springs. For example, you can find Miami Springs Golf & Country Club alongside historic landmarks like the Curtiss Mansion and the G. Carl Adams House.
Average rent for a studio: $1,350
Average rent for a one-bedroom: $1,775
Average rent for a two-bedroom: $2,195
Distance from Miami: 11 miles
Apartments for rent in North Miami
North Miami is just 11 miles north of Miami and is the second suburb on our list. The area is home to about 59,200 people, and the average rents are much less than in Miami. For example, a one-bedroom unit in North Miami costs $1,775 compared to $2,730 in Miami.
There is plenty to explore in North Miami. This standout among affordable Miami suburbs has beautiful beaches along Biscayne Bay, where you can swim, sunbathe and try out any water sport you want. You can also explore the MOCA (Museum of Contemporary Art), which has a collection of contemporary art and often hosts a revolving door of new-age exhibitions.
Average rent for a studio: $1,300
Average rent for a one-bedroom: $1,800
Average rent for a two-bedroom: $2,100
Distance from Miami: 15 miles
Apartments for rent in Opa Locka
For those on the hunt for budget-friendly suburban living near Miami, Opa Locka is just 15 miles to the north. The rental prices are much more affordable as the average rent for a one-bedroom unit is $1,800, compared to Miami’s $2,730 rent.
Opa Locka is known for its Moorish Revival architecture, and you can explore the historic district to admire the distinct architectural style and muraled walls. The city is also home to the Opa Locka Indoor Flea Market, where you can shop for a variety of goods and experience the area in its full glory.
Average rent for a studio: $1,300
Average rent for a one-bedroom: $1,800
Average rent for a two-bedroom: $2,325
Distance from Miami: 9 miles
Apartments for rent in Miami Shores
Miami Shores is nine miles to the north, making this affordable option great for renters commuting into Miami proper. With the average rent for a one-bedroom costing about $930 less than in Miami, Miami Shores may be the burb for you.
A small village, Miami Shores offers a calm escape at the Miami Shores Country Club, where you can enjoy golfing, dining and banquets in a picturesque setting. The town is also close to the beautiful Biscayne Bay and its scenic parks, providing opportunities for kayaking, fishing and watching the wildlife go by.
Average rent for a studio: $1,622
Average rent for a one-bedroom: $1,850
Average rent for a two-bedroom: $2,325
Distance from Miami: 12 miles
Apartments for rent in Hialeah
About 12 miles northwest of Miami, you’ll find the suburb of Hialeah, another great area to add to your list. Home to about 220,500 residents, Hialeah is a great option for renters looking for a city-like feel with more affordable rental prices.
You can experience Hialeah’s character by exploring Westland Mall and its surrounding area, with a wide range of restaurants and shopping options. The city is also known for Hialeah Park, a historic horse racing track and casino with a beautifully landscaped garden and a rich history that’s worth learning.
Average rent for a one-bedroom: $1,895
Average rent for a two-bedroom: $1,995
Distance from Miami: 20 miles
Apartments for rent in Miami Lakes
Ranked sixth on our list, Miami Lakes is a widely recognized and beloved Miami suburb. This community has close to 30,400 residents, making it feel more like a small town.
Miami Lakes has plenty of outdoor areas, like Miami Lakes Park, where you can go for a leisurely walk, picnic or simply sit and enjoy the peaceful surroundings. The city is also known for its Main Street, lined with shops and restaurants, providing a pleasant atmosphere for an afternoon of eating and perusing the local shops.
Average rent for a studio: $1,750
Average rent for a one-bedroom: $2,150
Average rent for a two-bedroom: $3,350
Distance from from Miami: 7 miles
Apartments for rent in Miami Beach
Next on our list of renter-friendly Miami suburbs is Miami Beach. It’s only about seven miles east of downtown, making it a great option for those commuting. Miami Beach is famous for its high-profile residents and beautiful sandy beaches, where you can cool off by the water while enjoying all the amenities that come with waterfront living.
Miami Beach’s Art Deco Historic District is a must-visit for anyone interested in architecture and history, offering a unique collection of well-preserved buildings, trendy boutiques and lively nightlife.
Average rent for a studio: $2,335
Average rent for a one-bedroom: $2,542
Average rent for a two-bedroom: $3,058
Distance from Miami: 15 miles
Apartments for rent in Doral
If you’re a Miami local, you’re probably familiar with Doral. In Doral, one-bedroom units generally rent for $2,542 on average, and two-bedroom units are available at around $3,058, providing considerable savings compared to Miami.
Doral has plenty of options for golfers, with countless courses in and around the area. For those looking to kick back, the city has beautiful parks like Doral Central Park, where you can enjoy food alfresco, walking trails and wide open sun-baked spaces.
Average rent for a one-bedroom: $2,592
Average rent for a two-bedroom: $2,859
Distance from Miami: 15 miles
Apartments for rent in Miami Gardens
Finishing off our list of affordable Miami suburbs is Miami Gardens. There is a lot to explore living in Miami Gardens. For example, you can watch the Miami Dolphins games, globally touring concerts and other major events at Hard Rock Stadium.
Miami Gardens is also home to the Betty T. Ferguson Recreational Complex, with athletic fields, a water park and more resources to get yourself moving under the Miami sun, making it one of our top choices among affordable Miami suburbs.
Welcome to Miami
Whether you’re craving the tranquility of tree-lined streets, the charm of local cafes or the warmth of tight-knit communities, there’s a sun-filled suburban pocket near Miami waiting to welcome you. So, pack your sunglasses and your dreams and dive headfirst into these budget-friendly havens where the sun shines just as brightly, but the living is easier and lighter on your wallet.
Remember, when it comes to Miami’s affordable suburbs, value can match up with allure, proving that finding a home in paradise doesn’t always have to come at a premium.
If you’re looking to make the move from renter to buyer, make sure to also check out the most affordable Miami suburbs to buy a home.
Methodology
These affordable Miami suburbs are based on whether a suburb’s one and two-bedroom rent was less than Miami and under 20 miles from downtown Miami. Average rental data from Miami rental market trends on October 26, 2023. Population data sourced from the United States Census Bureau.
Investing in real estate is some of the oldest and most reliable financial advice in the books. Few other assets can compete with real estate’s vast array of benefits. These benefits include tax advantages, appreciation, relative impunity to market shifts, and even the potential for passive income.
But even if you have every intention of investing in real estate, it can be challenging to get started. After all, even a modest home usually requires a substantial down payment. And it can take years to save up those five-figure sums. The term “real estate investor” may bring to mind a multi-millionaire who manages several properties, leaving you feeling overwhelmed enough to give up the ghost entirely.
Fortunately, it is possible to invest in real estate with little or no money, even if you aren’t swimming in discretionary income. For instance, with an Opportunity Fund or REIT (Real Estate Investment Trust) you can get your foot in the door even if you can’t afford to purchase an entire property. There are also a host of ways to leverage your own home. These include house hacking, renting vacation space on Airbnb, and more.
In this post, we’ll break down everything you need to know about how to invest in real estate. We’ll go over some of the most common types of real estate investing. We’ll also break down how they can help you make money. And we’ll explain how you can begin, no matter how much capital you have in hand.
Why Invest in Real Estate?
Before we dig into the meat of the post, let’s take a moment to backtrack. Why is real estate investing such a well-worn piece of financial advice?
You’ve probably heard that diversifying your portfolio of real estate investments is essential. But your “portfolio” doesn’t just have to live on the stock market! Real estate investing gives you, as the name suggests, a real, tangible asset. And it’s much less vulnerable to the capriciousness of the market.
Real estate investing can help you not only build home equity but also generate passive cash flow. Both through the process of appreciation and the more intentional, hands-on approaches we’ll study further below. And owning your own home can help you reap financial benefits while simultaneously providing for one of your most basic needs.
How to Invest in Real Estate with Little Money
When a down payment might cost as much as $60,000, it’s understandable that many first-time property shoppers feel overwhelmed. They say you have to spend money to make money. Yes, but that’s quite a hefty figure for the average American earner.
To be sure, some real estate investment strategies require a good deal of cash upfront to be workable. But there are other tactics that don’t necessitate such a large lump sum to begin with. This means you don’t have to be a real estate mogul to be a property owner. We’ll break down various strategies at both ends of the spectrum below.
Types of Real Estate Investing
Let’s get into the nitty-gritty. What types of real estate can you invest in?
There are three main types of investment properties available to real estate investors.
Residential properties are probably the ones you’re most familiar with. They are exactly what they sound like: buildings used by individuals and families as residential living spaces. These properties include single-family homes, duplexes, apartments, condominiums, and townhouses, and multi-family homes (so long as they’re being used residentially and don’t exceed four units).
Commercial real estate are properties used to conduct business. They may include offices, storefronts, retail spaces, farmland, and large multi-family houses or apartment buildings.
Industrial real estate are properties that serve industrial business purposes, such as factories, power plants, or storage and shipping warehouses.
Furthermore, there are both active and passive forms of real estate investing.
Active investing is, well, active. It requires a good deal of time, energy, and commitment from the investor. Active investing may become a part- or even full-time job for the investor. They usually share ownership with few (or no) other people and thus bears a lot of responsibility for the success of the investment.
Passive investing, on the other hand, allows the investor to reap the benefits of investing without taking on the pressure and responsibility of full ownership of a tangible property. In most cases, passive investing involves supplying capital to a larger investment pool. You earn capital gains on loan interest through dividends paid to shareholders.
We’ll go into it all of this in more detail, including specific ways you can invest in real estate, both active and passive.
How Real Estate Investing Can Help You Earn
Before we break down the specific ways you can get started investing in real estate, let’s talk about how it can help you make money. (After all, that’s the whole point!)
You can invest in real estate in several ways, depending on what type of investing you’re participating in.
Equity and appreciation
Purchasing real estate equips the owner with a “hard asset”; the tangible property or building. Owning this kind of asset confers equity, or value. It isn’t as vulnerable to the fluctuations of the market as stocks, bonds, and other securities. Furthermore, property has a longstanding history of increasing in value over time, or appreciating.
On the contrary, other types of purchases (like automobiles) depreciate, or lose value. Thus, purchasing a property may allow you to earn income passively simply through the process of appreciation. It more or less ensures that the cash value of your home is a safe and stable part of your overall net worth.
Rental income
Chances are, you’ve had to pay rent to a landlord at some point in your life. Well, if you become the landlord, someone’s paying you the rent. And as long as that rental price eclipses your total expenses, including your mortgage and maintenance costs, the rest is profit!
Aside from managing the investment property, you can also collect rental income by sharing your space on platforms like Airbnb or house hacking, which we’ll explain below.
Sale profit
This happens when you buy a home with the intention to fix it up and sell it down the line (also known as “house flipping”.) It’s the difference between your sale cost and your purchase cost (minus all the expenses put into maintenance and improvements) is pure profit.
Loan interest
The interest charged on home and property loans can increase the value of real estate investments made through REITs, investment platforms, and private equity firms.
Ways to Invest in Real Estate
Now we know a bit about the different types of properties available to investors and how those real estate investments stand to help you earn cash.
So, what are the specific ways to go about real estate investing? There are several in both the “active” and “passive” categories.
Active:
House flipping, or rehabbing, is when an investor purchases a property with the sole intent of fixing it up to sell it later on.
Wholesaling is similar to flipping houses, but less work intensive. Wholesaling occurs when an investor purchases a property they believe is underpriced, so they can quickly sell it to another investor at a profit.
Rental properties give investors a long-term way to draw profit from their investments, though they do require lots of hands-on management and maintenance over time.
Airbnb, Vrbo, and other vacation rentals can often be listed for substantial per-night prices. They can be especially lucrative in high-demand travel destinations.
Passive:
Private equity funds pool the assets of many investors, which creates a larger, more powerful investment fund. These funds are usually overseen and allocated by a dedicated manager. They may have high minimum investment thresholds and requirements to join.
Opportunity funds also pool investors’ assets, but with the specific purpose of making investments in qualified Opportunity Zones. These are low-income, up-and-coming communities that would benefit from private investments and economic development.
REITs are companies that invest in commercial properties. Private investors can purchase shares of the company and earn income on capital gains in the form of dividends.
Online REIT platforms can make real estate investing accessible to beginning investors, often carrying no net worth or accreditation restrictions. They may allow you to invest in specific properties or in pre-built, diversified portfolios of real estate.
We’re going to break down these different investment options in even more detail below. But first, let’s start a bit closer to home—literally.
Starting with Your Own Home
One of the most straightforward ways to invest in real estate is probably already on your financial to-do list, anyway: purchasing your own home.
Purchasing a home of your own allows you to kill two birds with one stone. You’re taking care of the basic need of shelter, while also leveraging the purchase to reap a host of financial benefits.
Here are just a few ways that owning a home can help you save and earn money.
Build equity: As discussed above, property ownership confers relatively immutable equity to the purchaser—that is, your home is a fairly safe, tangible asset to add to your overall investment portfolio.
Receive tax benefits: Certain homeowners’ expenses, including real estate taxes and home mortgage interest, are tax-deductible. And if you sell your home, you may exclude up to $250,000 of capital gains (or $500,000 if filing jointly) from your taxes.
Take advantage of appreciation: Even accounting for the 2008 crisis, the cost of homes and other properties have steadily increased over time for the past 50 years. So, the home you purchase today will likely be worth more than the price you paid for it in the future.
Stop paying rent: Although you’ll likely still have a mortgage payment and other expenses to cover as a homeowner, you won’t be paying rent to live in another person’s property. It’s a cost that is essentially entirely wasted, since you aren’t building home equity in the rental property.
Keep the value of your home improvements: When you own a home of your own, any improvements you make will add to the property’s total value, beefing up your asset as well as beautifying your living space.
House Hacking
Another way to make money by purchasing your own home is known as “house hacking“. It’s a real estate investment strategy wherein you leverage rental income from your primary residence to live there cost-free.
The term was originally coined by entrepreneur and author Brandon Turner, who wrote “The Book on Investing in Real Estate with No (and Low) Money Down” and “The Book on Rental Property Investing.”
House hacking may be done, for example, by purchasing a duplex. The investor rents out one unit at a price that covers the mortgage cost while living in the second unit. Some homeowners have also used space-share platforms like Airbnb to offset their housing costs in the same manner.
Real estate investors can use this strategy to pay off the property and even create a profit margin. This will eventually allow them to invest in more rental properties. Thus, house hacking is a great way to combine the personal financial benefits of homeownership with the long-term earning potential of other types of property investment.
Buying a Home Without a Huge Down Payment
Given the recent trends in the housing market, you may feel daunted by the prospect of becoming a homeowner. In 2023, the U.S. housing market experienced significant challenges, with home prices rising to near-record highs.
But there are many incentives and programs designed to make this large investment more feasible for first-time home buyers.
FHA (Federal Housing Administration) Loans may allow borrowers to purchase a home with a down payment as small as 3.5% of the purchase price and with credit scores as low as 580. (You may also be approved for an FHA loan with a lower credit score, but your minimum down payment may be higher.)
The USDA also offers low-cost loans to low- and moderate-income households purchasing homes in qualified rural areas.
Down Payment Assistance Programs offered by local governments and private firms can provide grants, loans, and educational materials to prospective home buyers
Many other financial institutions and organizations also have special incentives for those purchasing their first homes or low-income families in the housing market. Make sure you check with your local housing authority to learn more about what’s available in your area.
Active Investment Opportunities
Want to get hands-on? Here are the details on some of the most popular and accessible active real estate investment opportunities.
House Flipping
If you’ve ever watched more than thirty minutes of HGTV, chances are you’re at least passingly familiar with the idea of flipping houses. It’s basically where you purchase a home with the express intent of fixing it up and selling it (at a higher cost) later.
House flipping is a great way for investors to earn a significant profit. However, they do need to know how to complete the flip successfully without incurring too many costs. Expenses can quickly eat into the investment’s return.
Finding a Home to Flip
House flippers have to be able to recognize a home that may be slightly undervalued but would be able to sell well given the proper upgrades. This involves both an understanding of the area’s desirability and the types of improvements that generate increased home value.
House flippers are responsible for the entire cost of the home purchase. They must also pay for all the upgrades, which they may either do themselves or hire out to professionals.
Either way, flipping houses incurs a hefty up-front cost, and it does come at a risk. Even after you make all the improvements, it’s possible that the house will languish on the market.
This can mean racking up maintenance, taxes, and other expenses for the real estate investor. However, a properly executed, short-term flip can create a substantial profit margin in a relatively small period of time.
Wholesaling
Like house flippers, wholesalers purchase homes with the intent of selling them quickly. But, they aren’t planning to do any heavy lifting along the way.
Instead, wholesalers find properties that are undervalued for their market. They scoop them up and resell them to other investors at a price closer to their true value. Thus, earning the difference as a profit.
Rental Properties
While managing rental properties may seem like a straightforward and reliable way to earn income, it’s one of the most work-intensive approaches on this list. It does require enough up-front capital to purchase the property (or properties) in the first place. However, landlords do stand to see substantial and steady returns in exchange for the work and effort they put into their properties.
After purchasing a viable property, which needs to be well-maintained, in a desirable location, and well-advertised, landlords are responsible for filling that property with qualified tenants. This can involve a time-consuming and labor-intensive screening process.
After all, as a landlord, you’re giving your renters the keys to your investment—literally! It can be a very risky move if you don’t take the time to ensure your tenants are well-qualified.
Finding & Qualifying Tenants
Along with running a standard background check, landlords may also conduct interviews with and request credit reports from prospective renters, all of which takes time. And don’t forget: every month your rental property is unfilled is a waste of potential income.
Once you do find qualified tenants, you’ll be responsible for a host of obligations unless you hire a property management company. You’ll need to provide maintenance and repairs. You’ll also need to stay on top of rent collection and record-keeping. It can quickly become unwieldy once you have several properties.
You’ll also need to be sure you’re in compliance with all the renters’ rights that exist in your jurisdiction, including laws that regulate the eviction process. Of course, you’ll need to put in the work to find good renters and a well-maintained property in the first place. When done so, managing rentals can provide a smooth and steady source of income for relatively little active work.
Seller Financing
Want to buy an investment property with no money down? Look into seller financing or a land contract. This is where the seller acts as the bank. You make your mortgage payments, including interest, to the seller.
After a few years or so, you will have enough equity in the home to get a bank loan. You can then make a lump sum payment to the seller.
Private & Hard Money Lenders
Private money lenders generally charge between 6% to 12% on the money borrowed. Hard money lenders usually charge 10% to 18%. Hard money loans are not from banks. They are from individuals or businesses aimed at financing real estate investments for a return on their money.
Hard money loans are used by investors who don’t qualify for conventional financing. They are typically used to fund renovations. Once the house is finished or has some equity in it, the borrower then refinances to a conventional mortgage with a lower interest rate.
Airbnb, Vacation Rentals, and Space Sharing
Managing a traditional property, wherein renters sign a multi-month lease, is not the only way to make money from an investment property. Platforms like Airbnb have revolutionized the real estate market. They allow homeowners (and sometimes even renters) to make money by renting out their space on a temporary, per-night basis as a vacation rental.
What’s more, you don’t necessarily have to rent out an entire home or unit to participate. A private room, or even a couch in a shared living room, is acceptable for some travelers using these services.
Airbnb and other vacation rental platforms make it simple for a novice renter. You don’t need to have a huge amount of know-how to start earning money this way. In fact, you don’t even necessarily have to “invest” in any property at all. Some landlords may allow their renters to list their housing on Airbnb as a sublet.
Airbnb Laws
However, as this new form of investment property has expanded, it’s created housing crunches in some cities. It’s resulting in “Airbnb laws,” or short-term rental legislation. These laws may limit your ability to use your housing in this way.
Always check your local regulations before you list your space on Airbnb or another of these types of platforms. If you don’t own the space, ensure that short-term sublets are allowed. Check your lease or ask your landlord directly.
Real Estate Investing Groups and Passive Investing
You may have noticed that many of the active real estate investment opportunities listed above do require substantial upfront capital to get started. You can’t wholesale or flip a house if you can’t purchase the house in the first place!
Furthermore, these active strategies generally involve a high level of skill, effort, and responsibility. It may not be feasible for those committed to other full-time careers.
Fortunately, there are still other ways to get involved with real estate investing, even if you don’t want to own or manage tangible property. (Or if doing so is out of financial reach for you right now). These passive investment tactics can help you glean the benefits of real estate investing without taking on quite as much of a fiscal and physical burden.
Private Equity Funds
A private equity, or PE fund, pools contributions from various investors to make larger investments. They’re often limited liability partnerships. That means there are fixed periods during which investors do not have access to their holdings.
Instead, PE funds allow investors to earn gains on debt and equity assets passively, without putting in much active work or research. Asset allocation and investments are managed by a dedicated individual or group. They earn money through annual fees as well as profit sharing.
PE funds come in various types, including the following:
Core equity funds generally invest in established commercial properties. They don’t carry risks like needing major improvements or experiencing losses for lack of consumer demand. The core strategy is simultaneously the least risky among PE funds and, typically, the least gainful.
Core plus equity funds generally follow the core strategy, but take a few more risks on properties that may require minor upgrades. This leads to a higher risk-return ratio on average.
Value added equity funds may invest in commercial properties that require substantial upgrades or new management to operate at their full potential. They may also seek to sell the property after improvements are made to create an additional profit margin.
Opportunistic equity funds offer the highest potential rewards, along with the highest risk. Investment properties purchased via these funds may need new construction or even land acquisitions. The payoff of such a new business venture is all but guaranteed. Furthermore, these developments take time, which means your investment capital may be tied up for longer. However, when they pay off, opportunistic equity funds see some of the best returns of the bunch.
Although PE funds are powerful real estate investment engines, they do often have high minimum investment requirements, generally not less than $100,000. Some funds may also be limited to accredited or institutional investors who can demonstrate available means.
Opportunity Funds
Opportunity funds operate on a similar model to private equity funds but are specifically used to make investments in qualified Opportunity Zones. These are economically distressed areas designated by the state and certified by the Secretary of the U.S. Treasury. Opportunity funds are legally required to invest 90% of their assets into properties in these Opportunity Zones.
Because these areas tend to be up-and-coming (and because tax benefits can incentivize investors to support them), opportunity funds often see substantial capital gains for their investors. And taxes incurred on those gains can be deferred until December 26, 2026.
That means the longer the investment is held before that date, the lower your overall tax liability will be. And opportunity fund investments held for at least ten years prior can expect their capital returns to be permanently excluded from capital gains taxes.
Of course, this strategy requires parting with your investment capital for a significant period of time. It’s best for those who can afford to put down the money to play the long game. If you can, however, investing in one is a great way to see substantial returns for almost zero effort.
Real Estate Investment Trusts (REITs)
A real estate investment trust(REIT) is a company that invests in commercial properties. As an investor, you purchase shares of this company just as you would any other. You earn income through its debt and equity assets in the form of shareholder dividends.
REITs operate similarly to mutual funds. They provide an excellent way for the average earner to experience the benefits of real estate investing. You don’t have to have a huge amount of capital to get started, as minimum investment requirements may be quite low.
However, they may carry high investment fees, especially in the case of private REITs (i.e., those not publicly traded on the stock market). Fees at these companies may run as high as 15%. REITs may also be illiquid and keep your money locked up for longer periods of time.
Online Real Estate Investment Platforms
In this digital, all-sharing-all-the-time age, most of us have already heard of crowdfunding. Real estate investments are no exception to the rules of the new millennium.
Online real estate investment platforms have begun springing up. They can make real estate gains achievable for average investors who may not have the towering net worth or accreditation status necessary to buy into more formal funds. Depending on the specific company, you might be able to choose specific investment properties to fund or buy into a diversified portfolio of investments.
Fees and minimum investment requirements are relatively low on real estate crowdfunding platforms. For instance, Fundrise lets you get started with just $500. That is much less than you’d have to pay to get in on most types of active investments! Check out our full review of Fundrise here.
Ready to Get Started Investing in Real Estate?
As you can see, there are several ways to start investing without saving up a five- or six-figure sum. And if you do it right, your investments can actually help you reach those high savings goals. You can then fund other types of investment projects!
However, as with any financial objective, planning and strategizing is key. Saving up as much capital as possible will help you get the best return on your investment once you’re ready.
You can’t allocate your assets without first keeping track of them, and to achieve that, you need to create a budget. If you’re in debt, aggressively paying it off will free you of a weighty financial anchor, so check out these powerful debt relief options.
Finally, if you intend to purchase property either to live in or as an investment opportunity, your credit score matters. It’s as simple as that. If your credit score isn’t quite where you want it to be, take these steps to raise it. Doing so will allow you to get the best interest rate once you’re ready to make the big purchase.
If you’re looking to buy a condo or townhome, understanding the distinctions may help you home in on the choice that better suits your lifestyle and needs. Read on to learn the major differences between these two kinds of property.
What Is a Condo?
A condominium is a private property within a larger property, whether that be a single building or a complex. Residents share amenities like clubhouses, gyms, pools, parking, and the common grounds, and pay homeowners association (HOA) dues to support those shared assets. If you buy a condo, you’ll own your interior space only.
What Is a Townhouse?
A townhouse is a single-family unit that shares one or more walls with another home, usually has two or more floors, and may have a small backyard or patio. If you buy a townhouse, you’ll own the interior and exterior of the unit and the land on which it sits. Upkeep of the exterior could be split between you and the homeowners association (HOA). 💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
Condo vs Townhouse: Differences
Both are part of a larger structure, unlike some other house types, and both usually share one or more walls, but some similarities end there. Here are the key differences.
1. Construction
In the condo vs. townhouse debate, construction differs. A townhouse will share at least one wall with a property next door. A condo could have another unit below and above it, in addition to neighbors on either side. That could mean sharing all surrounding walls and floors/ceilings.
2. Actual Ownership
If you’re considering townhouse vs. condo, what would you actually own? With townhomes, the buyer owns the land and the structure. That could mean some creativity with decorating the lot or the home’s exterior. With condos, the buyer owns the interior of the unit and an “interest” (along with all of the other owners) in the common elements of the condominium project.
3. Community
With both condos and townhouses, residents will have fairly close contact with their neighbors. With shared walls and spaces, residents may have more social relationships with their community than they would with a single-family home. That means it’s important for buyers to research the community when condo shopping. Is the condo social? Does it plan a lot of events, or do people generally keep to themselves? Since there are many shared spaces, understanding how the community functions could directly affect living there.
If a townhome isn’t part of an HOA, living in the complex could feel similar to living in a single-family home. In that case, it could be up to the buyer to create a sense of community.
4. Homeowners Associations
Condos come with an HOA, a resident-led board that collects ongoing fees that can range from $200 to thousands of dollars, and mandates any special assessments. The HOA also enforces its covenants, conditions, and restrictions (CC&Rs).
Not all townhouse communities have an HOA, but if they do, townhouse owners usually pay lower monthly fees than condo owners because they pay for much of their own upkeep.
5. Obligations and Regulations
What’s the difference between a townhouse and a condo when it comes to rules and regulations? Condo owners will be required to meet all HOA standards. That could dictate anything from what residents want to hang on their front door to whether they can have pets, how many, and whether Biff needs to be registered as a service animal or emotional support animal. If an owner wants to renovate their condo, they may have to get the work approved by the HOA.
If a townhome is part of an HOA, many of the above restrictions could apply. However, if it’s not an HOA community, townhouse owners have more freedom to decorate the exterior of their home or maintain their landscape as they see fit.
6. Insurance
Condos have their own form of property insurance. HO-6 provides coverage for the interior of a condo and the owner’s personal belongings. In addition, the entire building needs to be insured, which is paid for with HOA dues.
If a townhouse is part of an HOA community, each property requires HO-6 insurance and coverage for the community through HOA dues. When a townhouse isn’t part of an HOA, buyers are typically required to have homeowners insurance.
7. Fees and Expenses
HOA fees for condos are usually higher than for townhouses because they cover exterior maintenance and shared amenities. If townhouse owners are part of an HOA, they’ll usually pay lower monthly fees because they pay for much of their own upkeep.
Condo owners don’t have to worry about repairing the roof or replacing siding. Everything exterior-facing is managed collectively and paid for with HOA dues, but those fees may be high and are periodically reevaluated, and so may rise over time.
8. Financing
It can be harder to obtain financing for a condo than for a townhouse. Condos may be eligible for conventional mortgage loans and government-insured loans. (Study the mortgage basics to learn more about the difference between these types.) Lenders of conventional loans will review the financial health of an HOA, whether most of the units are owner-occupied, and ownership distribution. Interested in an FHA loan or a VA loan? Both agencies maintain respective lists of approved condos.
In the case of a townhouse, the financing process is similar to that of a traditional mortgage because a townhouse includes the land it’s built on. Its value is factored into the process.
9. Resale Value
A large factor in a condo holding value is the management, which isn’t always in the hands of the owner. Strong management can help a condo maintain or grow in value. Additionally, where the condo is located will influence resale value. Condos generally hold value but don’t see the boost in resale expected with single-family homes. Similarly, buying a townhouse may not usher in the appreciation of most single-family homes. 💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.
Condo vs Townhouse: Which May Be Right for You?
Condos and townhomes have their fair share of differences, as well as some similarities. Overall, condos can offer a low-maintenance property where owners simply look after their condo interior. With condo ownership comes the added perk of shared amenities. But condos come with monthly HOA fees, which must be factored into any purchase. Additionally, the community association and its management of the property will likely have a large impact on what life is like in a particular condo complex. Condo buyers may be more community-minded, as they share space with their neighbors. (If a condo feels like the right choice, read a guide to buying a condo as you embark on your search.)
Townhouses offer more freedom and privacy than condos. Owners may have the option of personalizing their exterior and enjoying outdoor space if the property has a patio or backyard. Townhomes generally require more responsibility and upkeep than a condo, even if there’s an HOA involved. Exterior maintenance will be required. If this sounds like a good fit, dig deeper by reading a guide to buying a townhouse.
Of course, you may be better suited to a different living situation altogether. House or condo? Take a quiz to learn which of these options might be best for you.
The Takeaway
When it comes to finding a home, the perfect fit is up to the individual, but buyers may want to take a hard look at monthly fees, community rules, how social they intend to be, and precisely what they own and must maintain.
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FAQ
Between condos and townhouses, which is cheaper to buy?
The cost of a condo and townhome will vary based on location and size, but condos are often less expensive than townhouses because they come with no land.
Do you own the land around a condo if you buy it?
No. The purchase of a condo only includes the interior.
Is the resale value higher for a condo or townhouse?
In general, condos and townhomes don’t appreciate as quickly as single-family homes. The value will vary based on area, upkeep, and other conditions.
Between condos and townhouses, which has better financing options?
Financing a townhome is like financing a single-family home. A buyer can choose from multiple types of mortgages.
Financing a condo, on the other hand, involves a lender review of the community or inclusion on a list of approved condominium communities. Because a private lender could see a condo as a riskier purchase, the interest rate could be higher unless a large down payment was made.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Buying a home in the winter can present some unique challenges compared to other seasons. Due to the low supply typically seen in colder months, prices can increase in comparison to the spring and summer months. But it is not all gloom and doom. There is also less chance that you will be outbid compared to the summer buying months and the heating, fireplace and lighting are all on during the winter so you can see if they’re working. With the winter comes the good and the bad for finding a home, but here are the 5 potential obstacles you might face:
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Limited Inventory:
There tends to be less housing inventory on the market during the winter months. Sellers might be less inclined to list their homes during this time, which can limit options for buyers. This can make it challenging when you are trying to negotiate a price if there are a lot of buyers but not a lot of sellers. In the summer months, sellers would be more inclined to sell their property, creating more options but also increased competition for buyers.
Weather-Related Issues:
Inclement weather, such as snow and ice, can make it difficult to travel and view homes. Additionally, extreme weather conditions might impact the condition of the property itself, making it harder to assess certain aspects like the roof or exterior. Winter landscaping may not showcase the property at its best. Snow can cover the lawn and obscure landscaping features. It might be challenging to envision the property’s full potential when it’s not in its peak visual condition.
Flaws You May Not See:
If you’re viewing a home that is covered in snow, you may not be able to see subtle cracks in the home’s exterior or other areas of the home that need repairs. Some issues that need fixing may make or break your purchase of the home so it is especially important to ask questions about the home’s foundation, roof, and other elements during a property viewing. And even if you spot the repairs, they may not be able to be completed until the spring which, if it’s needed, can cause your utility bills to increase.
Less Competition but Higher Prices:
While there might be fewer buyers in the market during the winter, sellers might also be aware of this and less willing to negotiate on price. This is because they might be banking on the fact that fewer options are available to buyers. They know that you may not want to wait until the spring for a property so they can charge essentially whatever they want compared to the spring and summer.
Bad Weather Can Complicate the Moving Process
The cold weather can create a challenging moving day. With soggy boxes, freezing temperatures and a big U-haul that gets stuck in the snow, it is safe to say that summer moving is a lot easier. With lots of snow, you may be surrounded by boxes with not a lot of food and no wifi. Ensure that you’re well prepared if a big blizzard comes your way while moving because sooner than you know, you might be sitting by your Christmas tree in your brand-new home!
Although there may be challenges to buying a home during the winter, give all your worries to the real estate agents at Zoocasa. Give us a call today to connect with an experienced agent in your area!
After two years of sharp declines, existing-home sales are poised for improvement in 2024. But first, this slice of the housing market must weather the rest of a rocky year in 2023, with existing-home sales expected to end up 18% lower than those of 2022, according to the National Association of REALTORS®. That puts these transactions on track for their worst year in more than a decade.
NAR Chief Economist Lawrence Yun joined other leading housing analysts Tuesday at NAR’s virtual Real Estate Forecast Summit to discuss sales projections heading into 2024—and the experts agreed that better days are ahead for the real estate market.
Mortgage rates likely have peaked and are now falling from their recent high of nearly 8%. NAR predicts the 30-year fixed-rate mortgage to average 6.3% in 2024; realtor.com® projects 6.5%. This likely will improve housing affordability and entice more home buyers to return to the market, Yun says. NAR’s data shows that rates near 6.6% enable the average American family to afford a median-priced home without devoting more than 30% of their income to housing, the threshold commonly used to measure affordability.
NAR is projecting that existing-home sales will rise 13.5% and new-home sales—which are up about 5% this year, defying market trends—could increase another 19% by the end of next year.
Markets to Watch in 2024
Some housing markets likely will experience higher sales upticks in 2024 than others. “Job growth will be a determinant for long-term housing demand,” Yun said.
NAR evaluated 100 of the largest U.S. metro areas to identify the markets with the largest pool of potential home buyers, the greatest likelihood for home price appreciation and more. The following markets have the most pent-up housing demand for 2024, according to NAR:
Danielle Hale, chief economist at realtor.com®, said at Tuesday’s summit that while she’s optimistic the housing market will improve in 2024, inflation is the issue that could derail optimistic real estate forecasts. If inflation doesn’t continue to improve, she said, it could raise long-term interest rates, which then could discourage more homeowners from selling and prolong the inventory bottlenecks in the market. Younger generations of home buyers may continue to be sidelined by higher housing costs and remain as renters. “That could have huge ramifications for the housing market,” Hale said. “The inflation data is very important to watch.”
Overall inflation has been easing, although “shelter inflation” continues to rise. The latest reading of the Consumer Price Index showed that inflation decreased to 3.1% in November. (The Federal Reserve’s target for the inflation rate is 2%.) Yun said an “oversupply” of new apartment units will hit many housing markets in the coming months, which could bring rental rates down and help better control inflation. Hopefully, he added, that will disincentivize the Fed to continue raising its short-term rates.
Regardless of inflation and mortgage rates, the 2024 housing market likely will remain challenging, particularly for first-time buyers who are unable to leverage the proceeds from a previous home sale, summit panelists noted. Plus, amid record low inventory, finding a home to buy will be a top hurdle. Homeowners remain reluctant to sell and give up the low mortgage rates they locked in two years ago. Further, homebuilders have underproduced for decades, leading to a shortage of 5 million housing units nationwide, according to NAR research.
However, current homeowners are in an envious position: With rapid home appreciation in recent years, owners will grow their nest egg in 2024. Even those in markets that are expecting slight dips next year will be able to weather the drop. Home price appreciation has jumped by about 5% over the past year alone. The typical homeowner has accumulated more than $100,000 in housing wealth over the past three years, NAR’s data shows. Plus, the wealth comparison between homeowners and renters continues to be significant: The typical homeowner has $396,200 in wealth versus $10,400 for renters, according to Federal Reserve data. “Over the long term, homeowners build wealth over time,” Yun said.