NJ woman was told by her parents to buy a cheap home for $250K — here’s what you can learn from her situation
The cost of homeownership isn’t cheap, especially these days. But if you’re looking for something within your budget, make sure you look closely at exactly what you’re buying.
Mai McConnell (@toasterstroodal) showed her TikTok followers just how quickly a real estate decision can go south. The Middlesex, New Jersey, woman’s parents and grandparents told her that she should buy a cheap home in the $250,000 range. So, she went on Realtor.com to see what that amount could get her in her area.
McConnell found a three-bedroom, 1.5-bath, 1,980-square foot townhouse that cost $244,900. But once she took a look at the photos on the listing, she saw why it was so cheap. There were entire walls covered in mold and damaged floorboards.
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“It’s a literal biohazard,” McConnell said in her viral video. “The next time that [your] mom or dad or grandpa says, ‘you should just buy a house,’ show them this.”
The last time that the median price of a home was in the $250,000 range was in 2013, according to Federal Reserve data. Home prices have steadily increased since then, especially during the pandemic, before landing at $417,700 by the end of 2023.
But you can find ways around these expensive prices.
Decide what’s worth fixing
McConnell found a home that isn’t even worth renovating. She called it “a literal teardown” that “has to be destroyed.”
Even if the land is valuable, there are some things that just aren’t worth the additional work — or the mounting costs.
Manny Angelo Varas, CEO of the Miami-based homebuilding firm MV Group, told CNBC that the major red flags for a fixer-upper are: a dilapidated foundation (which can put you out $25,000 for a 2,000 square foot home) or an outdated electrical system (roughly $20,000).
But TD Bank discovered that 59% of first-time homebuyers want to buy a fixer-upper or modest starter home.
Varas told CNBC that it’s the aesthetic renovations that will get you the most bang for your buck, such as redoing the bathroom or kitchen. These items will make the home look nicer, and could increase its resale value down the road.
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Consider moving to a cheaper state
McConnell already lives in a less expensive area because she’s in New Jersey, not Hawaii or California — although the state’s cost of living is still about 12% higher than the national average.
The best places for those under the age of 25 to buy a home are in the Southern and Midwest states, according to a recent Point2 survey.
For instance, in Texas, the survey said that you can purchase a home for less than $350,000 in Corpus Christi, Laredo and Forth Worth. This range is close to the $250,000 suggestion McConnell heard from her parents and grandparents.
This would mean that the recommended 20% down payment would be around $60,000, as opposed to $80,000 for the median household price in other parts of the country.
However, $60,000 would be hard to swing for an American of any age. The median annual salary is $59,228, according to the U.S. Bureau of Labor Statistics. But if you put away a chunk of money every week and invest it. After all, the miracle of compound interest could make that $60,000 come a little faster.
Do you actually need to buy a home?
If you don’t have the money to buy a new home — or the patience to fix up an old one — you can still invest in real estate.
A great way to do this is by investing in real estate investment trusts (REITs). Not only are they beginner-friendly, REITs it’s possible to invest small amounts of money.
It essentially gives you exposure to the real estate without having to actually own (and manage) the property. You won’t have to pick up the rent or wake up to a plumbing emergency in the middle of the night, but you’ll reap the benefits of commercial and residential properties.
Just like any stock, your shares increase in value, or you get dividends, depending on the REIT you invest in. It’s an easy and affordable way to start your real estate portfolio.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
