The Expert Podcast

Yes, the real estate market is crazy. If you've been looking for a house, maybe you're renting an apartment and you're seeing the interest rates have been up 7-8%, almost 9%. You're seeing home prices through the roof and wondering, "Am I ever going to be able to buy a home?" Well, there's another strategy we've talked about here on this channel many times: buy the cheapest house you can stand. It's got to be better than renting an apartment. How cheap can it get? Well, here's a perfect example:

This is a house in a small town in Central Florida called Crawfordville. It's a two-bedroom, 800 square foot house, but your apartment might be the same size—you might be in a 2-1 apartment. It's on a quarter-acre lot. From the pictures, it looks like it's in decent shape. It's not a brand-new house, but at least it's livable, right? There's nothing that's completely destroyed. It's got a little bit of a backyard and it's not too far from the water—you can see the little red outline here. It's not waterfront, but it's not too far.

What does that mean for you as a potential buyer? Well, even if this isn't your dream house—maybe you want a bigger house or something with more land—at least it gets you to stop paying rent. It gets you into the housing market. You're probably going to need a 5% down payment, which will put you at maybe $67,000. That's probably what you'd have to pay for a first payment and security deposit on an apartment. Your mortgage payment, according to this, is $800 a month—that’s about right with a 7% interest rate. Maybe you can live here for 2 or 3 years, build up some equity, and sell it for a little more than you paid for it. At least your money is going towards a mortgage, not towards rent.

Look, you don't have to buy this house there, but it just shows there are many houses in the $200,000 range and under where the rent or mortgage would be less than your rent. And you're a homeowner. In addition, it puts you on that ladder—the escalator to homeownership of something that you prefer to have. If you wait until your dream house is affordable to you, it may always be outside of your reach. But there are always houses you can get that are affordable, which may not be your dream home, but at least it's a home. It's better than your apartment. You become a homeowner and you can go that route.

You also get some tax benefits. That's not the only reason to buy a house, but tax benefits can help. At that point, your mortgage payments are tax-deductible. You can deduct them from your income and save some money.

Certainly, there are downsides. You might have to do some maintenance. You’re going to have to cut the grass. If your sink breaks, you have to fix it instead of calling the landlord. But on the other hand, you have control. Your rent's not going to go up every year. They can’t kick you out for ending your lease. If you want to keep staying there, you can stay as long as you want. You're a homeowner. Your mortgage payment stays the same. It doesn't go up, whereas your rent may go up $100 or $200 every year, or they may pull back some of the amenities or charge you for things that you got for free in the past.

Something to consider. We always like to say: buy the cheapest house you can stand. That way, at least you're on that homeownership ladder, which is the biggest way to create wealth for consumers.