The first-time home buyer is usually an individual or a couple likely purchasing their first primary residence or home to live in permanently. As it is their first such purchase, they are typically excited and more emotionally invested in their buying process from the start till the end. Due to the novelty of the experience, first-time homebuyers also need to educate themselves on mortgages, house loans, and the home-buying process in general. Home investors are usually people who invest in real estate and tend to be seasoned buyers and sellers. They have an excellent grasp of mortgages, house loans, taxes, income evaluation and related home-buying processes. They are not typically motivated by emotions when looking for their investment property. Their primary motivation is earning a profit, either through renting it out or selling it at a better price. Thus, they are actively seeking out a bargain and/or an investment-worthy home or property.
One of the most critical and challenging choices a person will face in their lifetime is whether or not to purchase a home of their own. Both first-time home buyers and investors have unique requirements and objectives. Still, it is essential to consider the differences between the two groups. The following are ten key ways in which a first-time home buyer’s home buying journey is distinct from investors.
- Financing Options – First-time home buyers may have limited access to financing options, as they typically have limited credit and income history. On the other hand, investors have more options available to them due to their significant investment budget or portfolio. They can often use existing or potential rental income to help qualify for larger loans.
- Down Payment – First-time home buyers typically have less money available for down payments, often relying on assistance programs, like CHMC loans or other first-time buyer incentives, to help cover the cost. Investors usually buy more than one property with and more extensive income portfolio along with low default risk and can afford to make larger down payments, making them more attractive to lenders.
- Location – First-time home buyers may be more likely to focus on location, choosing a home in a neighbourhood they like or one close to family and friends. Investors may not be as concerned with location as first-timers. The only important factor they consider when it comes to location is to buy properties in areas where they can generate a better return on their investment based on their investment goals.
- Taxes: Investors may be more knowledgeable about tax laws and deductions when it comes to owning a property, while first-time home buyers may not be as aware of these. The majority of the costs related to the closure of a real estate transaction can be claimed by the investor as a tax deduction, which will result in a reduction in the total amount of tax that must be paid. On the other hand, first-time purchasers do not have access to the same leverages.
- Price Point – First-time homebuyers may have a lower price point in mind, either because they are on a tighter budget or because they are unable to afford more expensive properties. However, investors may be more willing to shell out more money for properties that they believe will increase in value over time and earn better rental income, hence generating a greater return on investment.
- Timing – First-time home buyers may be more likely to be patient in their search for the perfect home, willing to wait for the right property to come along. On the other hand, investors can be more likely to purchase real estate rapidly because they aim to make a profit while considering the market’s present conditions.
- Property Condition – First-time home buyers may be more likely to be interested in buying a move-in ready home without incurring extra expenses after the purchase. Investors may be more willing to consider purchasing a home that requires some maintenance because then they can flip the property for a quicker return on their investment after paying a minimal amount towards remodelling the property.
- Negotiations – First-time home buyers with less experience in negotiations are more likely to rely on their realtor’s or lawyer’s advice to strike a better deal. On the other hand, investors with previous experience might be better used to negotiating using their own knowledge without additional help. And moreover, more prominent investors may have a dedicated team to research and arrange real estate transactions on their behalf.
- Long-Term Goals – First-time buyers may be more willing to invest in a house that they can easily picture themselves calling home for the foreseeable future. However, investors may be more likely to purchase a property with the immediate intention of either making a profit by selling it quickly or creating a stable income through renting it out.
- Risk vs. Reward: First-time home buyers may be more cautious when it comes to taking risks, while investors may be more open to taking risks if there is potential for a greater possibility of a more significant gain.
It doesn’t matter if you’re purchasing a house for the first time or if you’re an experienced investor; it’s imperative that you do your homework and have a solid understanding of the process. The purchase of a home is a significant choice, and you will want to ensure that you are making the selection that is best suited to meet both your current and future requirements and objectives.
