Peng Yu, Home Buyer in 46204

Is it wise to buy a home in a great school dstrict in Indiana, but much bigger than what we need?

Asked by Peng Yu, 46204 Sun May 4, 2008

This home is a new construction and the builder will give a lot of discount (50K for a 500K house). We can certainly afford this house. However, even given the considerations of having one kid inthe coming years and having our parents visit us, this house is still a little bit too big. Given the discount from the builder, will buying this house a smart move (in terms of resale and investment and life quality)?

One advice I got from friends is to buy a (not-too-big) home you need and use the extra money for other investment. Any advice from you will be appreciated.

Thanks in advance!

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Eric Karrfalt, Agent, Noblesville, IN
Sun May 4, 2008
First I would check on if you are really getting a discount on the lot. Are you really getting $50k off the price or was it $50k overpriced to begin with. Remember, value is what the market commands, not the price tag the builder puts on it. Second, I think price is relative to the city/town/county/community the home is located in. Is a $500k home the highest priced home around or are you on the lower end of the curve when it comes to pricing? Common thought says you are better off in investment terms when you are the lesser priced home in a more expensive area, you can improve the property and/or let the higher priced homes set the curve and draw yours up to their level. If you are the most expensive home, you are always setting the curve of which someone may or may not percieve that value. There are always exceptions to that thinking but generally speaking, I have found it to be true. I would also find out the average price and sq/ft of homes in the surrounding area and see how your proposed construction weighs in against them. If you are building at a substantial discount, it may be a good deal. If you are on the higher end of sales, I might reconsider. I would also look at the volume of homes selling in that price range. This would indicate demand. If only one $500k sale took place it might be hard to move the home. If 50 homes are selling a month, that would indicate a pretty good demand and demonstrate a market you could sell to.
All of this is speculation since we can't predict the future. Markets change and homes today will vary in value in the future. Are you building in a community that has a strong population growth? This would indicate good demand in the future. Is the area shrinking in population? Probably not a good investment.
Finally, Indiana has seen home appreciation at about 3-4% annually. Last year it was flat. Over the long haul, homes have been good investments but I would not expect the 50-100% run ups in price other markets have seen. Central Indiana has always been pretty steady, no big increases, but no big loss either. My advice, buy as much home as you are comfortable with. Keep within market averages and make sure you are not the most largest and expensive home in the neighborhood. Make sure the home is large enough that you can "grow" into it as time goes by. I have seen too many "McMansions", that are half empty and for the most part unused. Not that there is anything wrong with that, it's their choice. A home is always a balance between lifestyle and a financial decision. Hope this helped.
2 votes
Erik Armstro…, , 47802
Sun May 4, 2008
I have to agree with Eric. Just because you see a sales sticker doesn't mean your really getting a discount. Don't buy more house than you need. Everyone will fall in love with the 5 bedroom, 3 bath, with a swimming pool, and a grand piano. But if don't need 5 bedrooms, 3 baths, you can't swim, and don't play piano maybe it's not the right house for you.

You might consider hiring a real estate counselor or maybe just an independent appraiser before considering entering into a contract.

Good luck.
1 vote
Lori Choate, Agent, Indianapolis, IN
Sat May 3, 2014
In my opinion, no. You will be paying utilities and taxes that are higher than you need to be paying. I can help you find a home in a size that you can manage, and in a good school district. Call me at 317-313-3544. Lori Choate, Broker/Owner, CHOATE REALTY & Consulting
0 votes
Craig Bartels, Agent, Indianapolis, IN
Thu Jun 19, 2008
It's hard to give you a really good answer without knowing your whole financial picture. One thing to remember: A home you live in is not an investment. An investment is something that puts money in your pocket, not takes money out every month. A property you rent out is an investment, not the home you live in. If you can afford the home and this is what you want to do, and you are doing well setting aside money for retirement, etc. then go for it! BUT, if you purchase a home and have to feed that mortgage and have nothing left over to invest elsewhere, not a good idea, no matter what kind of "discount" you are getting.
0 votes
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