You better have deep pockets if you want a luxurious home in a pricey neighborhood. That said, you shouldn't go broke digging deep enough to buy your dream home. And you won't if you're smart. The key is to have a financial strategy for getting into your desired neighborhood. If you make smart financial decisions while buying your home, you will be able to enjoy your dream home without worrying about money. In fact, you may even make a nice profit when and if you ever decide to sell. Following are four financial strategies for getting a luxury home in your preferred neighborhood.
Avoid Newly Renovated
Cosmetic touches and finishes can affect the price of any home by about 15 percent. If you buy the most recently renovated house on the street, you will pay a premium for it. Unfortunately, that premium will be rolled into your mortgage, which means that you will pay for it for years. You will also have to pay interest on it. In most cases, renovations are only good for about five years, so buying a newly renovated home doesn't make much financial sense because you won't recoup the money you spent on a renovated home.
Don't Buy Expensive
Never buy the most expensive home in a neighborhood. The most expensive homes have zero equity, and you won't be able to build equity very quickly either. The most expensive house sets the price for the neighborhood. If you buy at the top, you won't be able to sell at a profit. Also, you will have more to lose if the cost of housing in the neighborhood drops.
Set a Low Budget
Never buy a house that makes you poor. Establish a low budget with a payment that you can easily afford. Having wiggle room in your household budget will help you keep your home during tough financial times.
Look at Comps
When buying in an expensive neighborhood, pay attention to the comps. Look for rising house valuations and quick sales. While nothing is a guarantee, buying in a rising market just makes more sense financially. Comps will also tell you if you're paying too much for a particular house.
If you want luxury, buy it. But don't let your house become a financial burden that you can't afford. Make smart money decisions while shopping for your dream home, and you will be financial stable and blessed with a nice house. For more guidance, work with a realtor like Celia Dunn Sotheby's International Realty that specializes in luxury homes.