How to Trim Spending With Lower Housing Costs

Lower Housing Costs

Widespread spending commitments define personal finance for most families, but some obligations stand out more than others.  In particular, housing costs are among the most substantial monthly expenses faced by homeowners and renters alike.  For owners, the cost of a home is only the beginning, setting the stage for further spending on updates, repairs, taxes, and other residential expenses.  And leasing a domicile also carries costs beyond monthly rent charges, including money spent on insurance and utilities.  With so many individual expenses pulling at your monthly budget, the following savings strategies provide welcomed relief, leading to lower overall housing costs.

How to Trim Spending With Lower Housing Costs

Buy Right

There are many costs associated with home ownership, but your first major concern as a would-be buyer relates to asking price.  Paying a fair price for property establishes an affordable cost foundation, on which to build equity in your home.  For the best results in potentially volatile housing markets, study trends in desirable neighborhoods.  How long do homes stay on the market before selling?  What is the average sale price for the style of home you’re looking for?  Are prices moving up or down?  Answering these and other questions about prospective purchases gives you the tools needed to make informed buying decisions.

Create Affordable Conditions

Sometimes creative solutions are required, in order to make your financial dreams come true.  If you are committed to home ownership, but can’t afford a conventional arrangement, there are several cost-saving measures to consider, for example:

  • Multi-unit property – In some cases, becoming a landlord leads to lower housing costs.  Owning a duplex, triplex or another type of multi-unit residential rental property enables you to lease part of the building to offset your own expenses.  Although it can save you money, serving as a landlord and caretaker are not passive roles.  On the contrary, be prepared to earn the money you save on house payments, administering to the needs of the property.
  • Shared expenses – Sharing living space with a roommate(s) can dramatically reduce living expenses when compared to living alone.  Not only is it possible to share the cost of rent or mortgage payments, but utilities, insurance, and even food costs can be equitably divided among residents, reducing everyone’s financial burden.  If you don’t have a particular individual in mind, turn to online resources that match roommates with affordable spaces.

Find Favorable Financing

There are many ways to establish down payments and finance property purchases.  And since market conditions continually evolve, you may be able to secure better terms today, than you did when you bought your home.  Online resources, like this comprehensive listing of loan alternatives, highlight various funding options, including rates and terms offered by competitive lenders.  To land the best terms, use these types of resources to compare your financing options.

By the time you apply for a loan, your credit history is already established, providing references lenders use to evaluate creditworthiness.  More than any other financial commitment, building and protecting your credit rating will keep you eligible for affordable financing.

Downsize for savings

There comes a point in family life when the nest empties and residential needs change.  If you find yourself living in more home than you need, there is no sense continuing to pay the cost of occupying and maintaining it.  Downsizing may have other financial benefits, such as tax breaks, but you can definitely lower housing costs immediately by reducing your payment and associated residential expenses.

Depending on your home’s size and layout, renting a room may present a viable alternative to selling; enabling you to generate supplemental income you can use to pay housing costs.  And in some cases, turning your home into a rental property may also be feasible, allowing you to downsize to a smaller home while building rental income from your original residence.

Affordable housing is central to effective personal financial management.  As you establish residence or make changes to your living conditions, use these moves to increase your chance of success.

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3 COMMENTS

  1. My first property was a 4-unit using FHA 3.5%-down financing in a suburb of Los Angeles. I lived in one unit and rented out the other three. Single at the time, I also rented out the bedroom in my unit and slept on a mattress in the living room.

    This was an incredible deal and has proved to be a major boost to my net worth. I’ll give you 4 reasons: 1) I was living for free while my friends were paying through the nose for L.A. rent, 2) I was building equity as my tenants paid down my mortgage, 3) I was cash flowing hundreds of dollars a month, and 4) I got 4 units an hour from Downtown L.A. for a mere $15,000 out of pocket, and the property has already substantially appreciated.

    And because I only put 3.5% down, I still had a lot of money saved up (+ cash flow from the tenants) to put into “real” real estate in the form of two private placements — a beachside luxury spec home development deal along the coast + a buy, rehab, retenant, refi apartment syndication in Arizona — the returns on which have blown the stock market out of the water.

    The FHA fourplex strategy really is a no-brainer for single Millennials. If one does nothing else in real estate, they will have succeeded by getting into a fourplex as a young man or woman with only 3.5% down.

    Assuming the rents cover their expenses, in 30 years when they’re in their 50s and the mortgage is paid off, and they’ve done the smart thing by raising the rents over the years, they will be sitting on a million-dollar asset that cash flows thousands of dollars per month at the cost of a measly $15k or so out-of-pocket when they were 20-something.

    I can’t think of any better way for young people with limited resources to prepare for their future so early on in life with so little cash out-of-pocket.

    • Owning property is generally always a great investment. Especially a duplex or a fourplex in your case. I can’t deny that getting a FHA or even conventional loan on a duplex and renting out the other unit is a personal pursuit of mine. I have years of experience in the mortgage industry at SunTrust Mortgage HQ and the largest credit union in the US in the mortgage department so I know the benefits and ins and out of all mortgage products.

      I just haven’t gone that route because the area that I live (Washington, D.C.) in is so expensive. I might not be living here in the next 1-2 years as I have a travel bug that I haven’t satisfied yet. I see that as “settling down” and I want the freedom to get up and move at the drop of the hat. For now, I’m enjoying my freedom but I may go down that route in the next decade! Thanks for the comment.

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