I’m visiting my family right now, and every discussion these days seems to be about real estate. I suppose it’s only natural: my cousin and his wife just bought their first home, my aunt sells real estate, my grandfather is heavily invested in real estate and my dad manages real estate.

The question that every family member gets — even the ones who are already proud home owners — is when are you going to buy a house? Occasionally, we get asked about investment properties, but generally the family wants to know if anyone’s found a real steal.

Real Estate Always Has Value

My grandfather immigrated from Europe. He was brought up with the idea that land ownership truly represents wealth and over the years, he’s managed to get most of the family thinking the same thing. To my grandfather, there really is no wrong time to buy real estate. He helped my cousin get a mortgage on his home even as the housing market is dropping because he’s confident that it will rebound.

In the same vein, my grandfather didn’t put his retirement savings in stocks or other investments that run even the slightest risk of being worth only the paper they’re printed on. Instead, he picked a few income-producing properties and worked hard to minimize expenses. I like to think of his strategy as successful conservative: real estate really can be one of the most conservative investments because, in general, real estate prices don’t surge upwards but it’s also one of the least liquid assets you can have. If you go about investing in real estate the right way, though, you really can make a bundle.

The House: Real Estate’s Starting Point

Moving into a house of your own really is real estate investment at its most basic. While I’ve seen plenty of breakdowns arguing that apartment-living is actually cheaper than home ownership, the general idea that you’re building equity rather than paying for the pleasure of a residence does make sense.

But when should you actually plop down the cash for a house? When is the right time to commit yourself to a mortgage? Is it, as my family seems to think, right this very instant?

While I don’t think that buying in a down market is a bad idea, I really don’t agree with the philosophy that any time is a good time to buy real estate. I say that not because I think it’s a good idea to buy when prices are sky high, but because I think that just buying can lead to picking mortgages you can’t afford or raiding your 401(k) for a down payment.

If you have good credit and a good down payment, though, I don’t think you should refuse to buy a house right now. I’m not saying that you have to buy a house, but I’m also not telling you that you absolutely shouldn’t buy a house until the market stabilizes. It has to come down to whether you can get a mortgage you’re comfortable in times that are uncomfortable, economically speaking.

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Bankrate recently ran an article titled, “A dozen ways to get a down payment.” The article was pretty in-depth, but I’d like to take a look at how realistic their twelve suggestions really are.

1. Set up an automatic saving plan. — An automatic savings plan is a great suggestion. Almost every bank makes it easy to set up an automatic withdrawal from your checking to your savings. It’s just a matter of doing it.
2. Get a gift from your parents, grandparents, other relatives or friends. — Personally, I don’t think that gifts are the best way to come up with a down payment. There’s a lot of potential for family problems down the road. That said, some families are more than happy to help out.
3. Sell a car, boat, motorcycle, collectibles or other assets. — I’d like to see a show of hands: how many first-time home buyers have a boat lying around that they can sell? Sure, if you have assets you can sell, go for it. Not very many people have that option, though.
4. Liquidate stocks, mutual funds, savings bonds or other investments. — This is another ‘you can do it, but I don’t recommend it’ idea. A lot of investments will provide you far more income in the future than a house will. If there’s no pressing reason to move into a house, it’s much better to wait and save.
5. Allocate your income tax refund. — Your savings account is a great place for your income tax refund. And yes, I do think it’s more than reasonable to use it for your down payment. But be careful about relying on your income tax refund — it’s not always as big as you expect.
6. Take a loan from your 401(k) retirement plan and repay yourself with interest. — This is the worst idea ever, second only to the next one on this list.
7. Withdraw funds from your 401(k) plan, subject to taxes and penalties. — Withdrawing money from your 401(k) is essentially robbing your future self: that investment balloons due to compound interest. The later money is added, the less money you get. Furthermore, there are significant monetary penalties for withdrawing money from your 401(k) plan.
8. Collect on a loan that you made to someone else. — It’s nice to be able to collect on a loan, but very few people have outstanding loans significant enough to help them make a down payment. Furthermore, if the loan is to a friend or family member, it’s entirely possible the lender will never see a cent of repayment.
9. Get a bonus from your employer. — I’d suggest expanding on this idea: make more money in general. Open a side business, take on more hours, etc. A bonus is kind of like winning the lottery, though. I wouldn’t suggest counting on it.
10. Explore homebuyer programs for public servants, if you qualify. — There are programs meant to help public servants buy homes. There are also other programs, often through trade associations that provide some level of support for non-public servants as well.
11. Apply for a state or local government homebuyer down payment program. — You should take advantage of any home buyer program you qualify for. There may be a little added paperwork, but the financial help is more than worth it.
12. Use a private down-payment assistance program. — My only objection to private assistance is that there are a few scammers out there who will take advantage of you. If you need the assistance and just can’t wait and save, be very careful and do your homework on whoever you decide to work with.

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Even with the rough spots in the housing markets these days, ‘flippers’ are still buying houses. These folks buy houses in poor condition, fix them up and sell them at a profit. Home buyers often like them because flippers need to sell their houses as fast as possible to avoid paying more than a month or two on the mortgage. If a house isn’t selling, flippers can get nervous and lower their prices.

But flipped houses aren’t necessarily good buys for homeowners that plan to stick around. If you’re shopping for a new home, there are a few reasons to skip the flip.

1. Flippers limit costs when fixing up houses. Not all flippers go for the cheapest building materials, but they do try to minimize costs wherever possible. To bring a house up to your standards, you might wind up tearing out some of a flipper’s work and paying for an additional remodel.
2. Flippers focus on the visible. Most flipped houses have awesome fixtures, beautiful paint jobs and other accents that convince buyers that the house is a beautiful piece of work. But slapping a fresh paint of coat on a wall doesn’t repair cracks or bring wiring up to code. And it’s the non-visible problems that can mean expensive repair work down the road.
3. Flippers do as much themselves as possible. Most flippers aren’t professional electricians or plumbers, but odds are they’ll try their hand at some wiring or plumbing, just to keep from having to call in a professional. That doesn’t mean that their work is bad but there won’t be any sort of guarantee.

If you’ve got your heart set on a house that was flipped, there are a few things you can do to protect your investment. The first is to check with the local permit office. If a permit hasn’t been closed, walk away. That means that the inspector doesn’t think the house is ready to sell. In some locations you can even get a copy of the inspector’s notes. You might also find that no permit was taken out. Maybe the flipper did only cosmetic work — maybe the house only needed some touch ups. But it’s more likely that the flipper went without a permit, which is illegal. That also means the work isn’t up to code and could be dangerous.

You can also ask your real estate agent to help you check out this particular house flipper. What other houses has he or she sold? Are the new owners happy with their purchase? A house flipper’s reputation is a good indicator of the work you can expect. Make the effort to learn about the house flipper in question. If necessary, ask them to show you around the house and give a detailed explanation of what work was done. Give them a chance to prove that their work really is worth an extra $50,000 or however much on top of the previous sale price.

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We face enormous societal pressure for buying a house: it seems to be the major goal for just about every family. And those houses that we’re supposed to buy seem to all look pretty similar: a single family home with a nice back yard in the right neighborhood and with the right appliances. But if you’re planning to slap down a big stack of dollar bills, it may be worth thinking outside of that single family box. After all, that sort of home is guaranteed to be expensive — while it is an asset, beyond a little appreciation it won’t make you much money.

But there are some housing options that might be a better fit for you. Consider these four ideas.

1. Consider a multi-unit property. Most of us aren’t in the financial situation where we can afford to make payments on an entire apartment complex, but you may be able to find a duplex or other building with just a few apartments in it in your area. Then, while you live in one unit, you can rent out the others. In most areas, rent from another unit may be enough to cover your monthly mortgage payment. And depending on the size of homes in your area, you may even be able to convert a large single family home into multiple units. The house I grew up in was actually divided this way: the basement was a separate apartment from the main level.
2. Combine living space and office space. If you run your own business — depending on the type of business, of course — you may be able to use one property as both your home and office. Doing so even gets you an extra write off on your taxes. Having worked out of my home for several years, though, I do have one piece of advice: maintaining boundaries between ‘home space’ and ‘office space’ is crucial. Ideally, you shouldn’t even need to walk clients through your ‘home space’ to get to your office space.
3. Look at non-traditional living spaces. While most people seem to look for the largest house they can get for their money, it’s worth considering going for an unusually small home or even a space that wasn’t originally built as a house. A small house, for instance, is cheaper to maintain, heat and power. And if you were to choose a building with multiple purposes (a friend of mine lives in a converted garage, for example), you may have an easier time selling the property later on.
4. Join forces on a home. Rather than limiting your home to you, your spouse and your children, you have the option of sharing space with a few other people. In the past, it was perfectly normal for Grandpa or Grandma or Auntie to move in, and it’s still an option today. You may choose to make financial arrangements or agree on services, like childcare, that your new roomie might take on. But don’t limit your house to just you.

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I went out to dinner with my grandparents this week. Today, they live in a six bedroom house (it seems huge, but it’s just enough to bed down all the aunts, uncles and cousins when everyone comes to town). But they started out, about two miles down the road and fifty-five years earlier in a house with four rooms total. It was tiny, built out of flimsy materials and they put everything they had towards paying it off. Within just a few years, they’d paid off the house, sold it and used that equity to buy something a little bit better. And they did that over and over again, eventually winding up in their dream house.

Even I am guilty of wanting to start at the top. I’d love to find a house that will hold the family I plan to build, rather than just me and my significant other. I’d love to build a house with little nooks and crannies that will be perfect for our hobbies and get a place with enough land to grow my ideal garden. But, even if we could get the requisite mortgage for such a lovely spread, we couldn’t afford it and we know it.

Instead, we’re starting small. Today, we don’t need rooms for kids or space for a big garden. We want to go a bit better than my grandparents’ original four rooms — I need a fifth room for a home office. But we’re following the new trend of smaller homes: we don’t need extra rooms, or to pay for them.

So think long and hard about what you need now and what you’ll need in your immediate future. In the next five years, do you really need to plan for separate rooms for your planned three children, especially if you aren’t planning to have them for another three years? Or can you count on the fact that, assuming nature conforms to your schedule, your children won’t quite require rooms of their own yet?

There is a lot to be said about planning for the long-term, for picking a home that you will spend the rest of your life in. But the fact is that, today, the average family spends perhaps four years in a house before moving. So plan for those next four years when selecting a new home rather than the next twenty. While you might not get into your perfect home quite as quickly as you would like, you will be able to find something a little kinder to your budget.

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It’s a story that we hear over and over again: a couple buys the most dilapidated house in town — a property that’s on the verge of being condemned. They work hard, fix it up and soon have a beautiful home. Tom Hanks and Shelley Long did it in The Money Pit, after all, so what’s stopping everyone else?

But it’s rarely that simple — there’s a reason that falling down houses are so cheap. The work necessary to bring a house to the point that people can safely live in it can equal the cost of the house itself. Bringing it up to the point that most people would consider it a good home is prohibitively expensive.

This morning, the New York Times ran an article about David and Gina Giffels, a couple in Akron, Ohio. The Giffels bought their home a little over ten years ago for $65,000. Reading the description of their home, that figure is unbelievable: it’s a huge 1913 Tudor home and could easily be called elegant.

The catch is that, when the Giffels bought the house, it was the quintessential money pit. It’s taken every day they’ve lived in that house to bring it up to the showplace it is now — and David Giffels admits that there are still some less visible parts of the house that he hasn’t finished renovating. While there’s not an exact figure listed in the article, the Giffels have easily put hundreds of thousands of dollars into renovations. They did $55,000 in repairs just to make the house habitable before they moved in and they’ve been working on it just about every weekend since.

I admire the Giffels — they dedicated themselves to the project and came out with a beautiful home (and no debt beyond their mortgage). It’s unlikely that they would have been able to find the quality of house they now enjoy for anything near their original budget. But I don’t think the money pit approach works for everyone.

It’s only partially an issue of skill — especially the skill of learning how to do new things, from grouting to mold removal. It’s also the fact that, despite what we might think when we find a romantic home in need of extensive renovations, there will a significant cost beyond the price tag on the house itself. It’s a matter of the time that a home owner will have to sink into projects, the cost of parts, the chance of an accident. And if a person doesn’t have relatives with some remodeling experience, as the Giffels do, or the money to hire a contractor, he is looking at an extended project where he will be doing each bit of work himself (and giving up weekends, vacation and any other spare time for the pleasure).

It’s your choice when you’re buying a new house. But, especially for first time home owners, I definitely recommend looking at some options besides that almost-condemned house down the road. Check out houses that have had a little more maintenance and care over the years.

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