Starter house vs lifetime house

sunrainmooncl

What is everyone's thoughts and plans with regards to buying a starter house that you will eventually grow out of vs buying a house that you can grow into?

For those who already own property. What did you do and what are your experiences?

Personally I am planning on buying a starter home that I will keep for 5-7 years before moving to a bigger house. It seems very risky though considering house prices are expensive now. I am in a good position to repay the mortgage at the moment but can't afford 500k+. Getting stuck in negative equity seems like a nightmare. Saving up the 20% for the second time buyer mortgage will be a pain as well.

LirW

Starter home is a term that was thrown around in the boom a lot. People would buy houses with the prospective view of selling up in a few years time to move to the forever home. Instead of the latter they got negative equity or lost their 'starter home'.
I know a couple that bought a 2-bed terrace for almost half a million in Cabra in the boom and now live there with 2 children and are on top of each other and in deep negative equity.

My point there is: what if plans go wrong and you get to stay 12 instead of 7 years? What if kids come along? It's probably the biggest transaction in your life after all. I'd only buy if I knew I can also stay there without feeling hopelessly cramped if the plan doesn't work out and personal circumstances change (sickness, children etc).

sunrainmooncl

LirW wrote: »

Starter home is a term that was thrown around in the boom a lot. People would buy houses with the prospective view of selling up in a few years time to move to the forever home. Instead of the latter they got negative equity or lost their 'starter home'.
I know a couple that bought a 2-bed terrace for almost half a million in Cabra in the boom and now live there with 2 children and are on top of each other and in deep negative equity.

My point there is: what if plans go wrong and you get to stay 12 instead of 7 years? What if kids come along? It's probably the biggest transaction in your life after all. I'd only buy if I knew I can also stay there without feeling hopelessly cramped if the plan doesn't work out and personal circumstances change (sickness, children etc).

Yeah, in an ideal world we would all buy a big house

Klonker

LirW wrote:

My point there is: what if plans go wrong and you get to stay 12 instead of 7 years? What if kids come along? It's probably the biggest transaction in your life after all. I'd only buy if I knew I can also stay there without feeling hopelessly cramped if the plan doesn't work out and personal circumstances change (sickness, children etc).

That example can work both ways. Take your example above, the other side could be if you bought the "for life" house and your circumstances change (children, sickness) you may not be able to make repayments and lose the house. If you bought the "starter home" it may leave you enough breathing space to still make the repayments in difficult times.

LirW

It most certainly comes down to what properties are you eyeing on. Is the starter-home a 1bed with 45 sqm or a 2bed terrace with 60-65 sqm? And is the forever home a 3bed semi or a 5bed? These are quite important factors.
Nothing wrong with a cozy apartment, even with children, but size and layout is the key. A 2bed wouldn't make you struggle the way a 1bed would when you suddenly find a partner or have kids.
The starter home has a lot more investment sides involved in the transaction because it's clear from the beginning on it'll have to go again. Location, neighbourhood, public transport connections, parking, management fees etc have a different kind of weight than it would have for a forever home because it can impact the re-sale price.

In the end it comes down to your needs, can you afford the mortgage, then go for it but borrow wisely. You're using your FTB bonus here. For some people that route is absolutely right. Only you can really determine that.

Also look for how much banks would approve you and what you realistically can get for it. 300k is not automatically buying you the house with a 300k asking. It'll show you really quick though what you really want and where you're willing to compromise.

newo

We bought a two bed end of terrace house for a ridiculous price in 2007. Planned to upsize in about three years. Price dropped horrendously. We then had three children and moved to a three bed bigger house renting which we've been renting for five years and rented our own house out. Ended up being very costly due to the tax on renting out our property.

House is now out of negative equity and we are borrowing to convert it to a four bed and moving back into it. As others say there are a lot of factors to consider. I always think it's best to go with your gut feeling if possible. Difficult sometimes I know though.

quadrifoglio verde

The rules surrounding income multiples means that it will be quite difficult to sell the starter home and buy the forever home down the line.
If house prices rise, chances are the starter home and forever home will rise by a similar %

However if your income doesn't rise significantly you'll only be able to borrow the same amount and you'll need a larger % deposit the second time round

witchgirl26

I honestly think it's time we stopped thinking in "starter home" terms. When we were looking, we looked at houses in budget that if we got stuck in, we could make work. I know too many people who are essentially stuck in the houses they first started in because of negative equity and price rises. I'd say look at in the sense of you'd like to move in 5 years but if you were stuck there for 10 years or even 15 could you make it work for you? Is there potential to extend to give any extra living space that might be needed? One couple I know who were stuck did that - changed the entire layout of the downstairs to make it work for them now they had kids and they're happy to stay there for the next 15 years now no matter what the market does.

The_Conductor

The whole concept of a 'starter home' and a 'forever home' is marketing balloney from 1990s-2000s in Ireland- which is unfortunately making a resurgence.

The concept runs along the line of- 'rent is dead money' you should buy a 'starter home' and when your circumstances change (children or whatever)- you should flip your 'starter home' and buy a 'forever home'.

This whole spiel coincided with a boom in apartment building in Ireland- as historically you either rented- or bought ye 3 bed semi with a garden somewhere out in suburbia.

We are, even now, building over 6 times more apartments than we are 3-bed semis- and the 3 bed semis are being built in increasingly less desireable locations- purely as a result of the more desireable locations playing host to higher density developments (but still not 'high density' by international norms- even in central Dublin).

There is a presumption that if you are buying a 'starter home' but don't intend on living there longer term- that somehow you are making a prudent financial choice- as Irish people love to vilify landlords- and view those who rent as unfortunate and deserving of sympathy, regardless of whether its a personal choice or necessity.

There is an expectation built on the part of a large number of purchasers of 'starter homes' that they can migrate to more appropriate housing down the road. According to the CSO- there are over 700,000 Irish living in inappropriate housing, normally defined as overcrowding under the local authority guidelines- most of whom are owner occupiers- resultant from buying a 'starter home' but for whatever reason- failing to make the transition to a 'forever home'.

These people- are among those ignored by the media- as they draw attention to the inherent flaws in the whole 'starter home' / 'forever home' nonsense.

Honestly- I don't think anyone should be buying a 'starter home'- unless you can see yourself living in a property longer term- you should save and do whatever you have to do- until such time as you are in a position to buy a home you are happy to live in longer term- or, shock horror- you rent somewhere that actually suits you.

The whole *need* to own property- alongside the vilification of landlords- is a particularly Irish trait- and anyone who shows how misguided this is- gets brushed under the carpet for telling an unhelpful tale. In other countries- it is not unusual to rent for life- and indeed to move property numerous times throughout our lives- as our circumstances change- renting larger and more appropriate properties when we have children/teenagers- or downsizing to suit or lesser needs as we get on in years. This whole concept- is alien to Irish- as indeed is the concept of retirement villages- which we are only belatedly paying lipservice to (assisted community living with the provision of appropriate facilities and amenities for the aged- including social events, trips offsite, shopping assistance etc etc).

I used to get angry with the term 'starter home' and 'forever home', the concept of 'rent is dead money' and the *need* to own property- now, to be honest, I'm just sad that people don't seem to have learnt anything- and all these fallacies that were put to bed a decade ago- are once again rearing their heads and being flogged for whatever they're worth by politicians and media cheerleaders.

In short- if you cannot see yourself living in a given property long term- I can't see how or why you think its fair or reasonable to buy it.

Sleepy

If there's a chance you'll have a family in the future buy somewhere that you can afford a 3 bed semi rather than buying a two bed apartment in the nicer / more convenient location.

The worst case scenarios are worth looking at in both scenarios:

Buying a "starter home" apartment in the convenient location, you'll be trying to raise a family in accomodation that's too small and that you're "stuck" with (or perhaps you'll be yet another accidental landlord trying to make up the difference betwen the rental income from your apartment whilst renting somewhere more suitable for your family.

Buying a "forever home" a little further out, you may well still be "stuck" there due to negative equity etc. but you'll still have a suitable home to raise your family in although you might have a slightly longer commute from a slightly less leafy suburb.

I don't know about you OP, but I'll take the latter circumstances over the former any day of the week.

Even if you look at best case scenarios, once you don't buy too far out, 3 bed semis tend to appreciate more than 1/2 bed apartments so if everything works out for you, trading up to a 3 bed semi in the "better" location is likely easier to do from a 3 bed semi in the further out location than from a 1 bed apartment within it. There's also the chance that you might finding yourself prefering the location you've lived in for a few years at that stage as your lifestyle changes (e.g. I'm far happier raising my kids in Portrane than I was raising them in Clontarf where we rented for 6 years prior to buying even though Clontarf would, by most objective measures, be considered the "better" area.)

Mrs OBumble

The "forever home" is also a silly concept as the population ages.

A semi or detatched home has grounds which are great for kids to play in, and for you to garden if you like that kind of thing. But when you get to old to maintain them, they are a pain in the a**, and you end up forking out for someone else to do the lawns so you're not ostracised in the neighbourhood. Ditto all the other maintenance stuff that you can do now, but an older you might not be able to manage.

Three / four bedrooms is a lovely idea while you have kids to fill them. But once the kids leave home, they're dust-collectors, and extra spaces to heat.

A more rural location is fine when you still have a drivers's licence. But when you eyesight goes, the RSA will take it off you. Or even better - you will realise yourself that it's time to stop before it get stop before it gets to that. (And Yes, they will. I know people it's happened to.) So you can be a prisoner depending on the kindness of neighbours to drive you - or you can move to a location which is still walkable or where taxi fares are reasonable.

Etc.

jimmycrackcorm

Starter homes was a term incomes into conning people to accept anything less than three bedrooms. The vast majority buying would start families at some point and unless their children were the same sex then two bedrooms wouldn't cut it at done point and they'd be forced to move from their starter.

Unless you're breeding like rabbits then typical three bed homes aren't starters.

Mrs OBumble wrote:

A semi or detatched home has grounds which are great for kids to play in, and for you to garden if you like that kind of thing. But when you get to old to maintain them, they are a pain in the a**, and you end up forking out for someone else to do the lawns so you're not ostracised in the neighbourhood. Ditto all the other maintenance stuff that you can do now, but an older you might not be able to manage.

I can think of several retired people that get great enjoyment and a pastime out of doing their garden and other maintenance.

Mrs OBumble wrote:

A more rural location is fine when you still have a drivers's licence. But when you eyesight goes, the RSA will take it off you. Or even better - you will realise yourself that it's time to stop before it get stop before it gets to that. (And Yes, they will. I know people it's happened to.) So you can be a prisoner depending on the kindness of neighbours to drive you - or you can move to a location which is still walkable or where taxi fares are reasonable.

Autonomous car sharing is coming and sooner than we'd expect. I think there will be a rise in demand for rural properties as a result.

Lumen

The concept of a "starter home" is part of "property ladder" thinking, which was not invented in the bubble.

"The ladder" made sense when people were getting 20 year mortgages aged 25, because by the time you were 35 you'd have paid off a third of the principal, got a few payrises, and be ready to go again.

Doesn't work so well with a 30 year mortgage at age 35, because ten years later at age 45 on you won't be able to get another 30 year mortgag and you'll only have paid off a quarter of the principal. The negative effect of the longer term more than counteracts the positive effects of lower interest rates in terms of principal repayment.

Mink

Lumen wrote: »

The concept of a "starter home" is part of "property ladder" thinking, which was not invented in the bubble.

"The ladder" made sense when people were getting 20 year mortgages aged 25, because by the time you were 35 you'd have paid off a third of the principal, got a few payrises, and be ready to go again.

Doesn't work so well with a 30 year mortgage at age 35, because ten years later at age 45 on you won't be able to get another 30 year mortgage and you'll only have paid off a quarter of the principal. The negative effect of the longer term more than counteracts the positive effects of lower interest rates in terms of principal repayment.

Very good point. We went straight to buying a house we were happy to live in for the duration of the 30yr mortgage because we are mid to late 30's & may not have massive increases in income, we have one child etc.

So we kept looking (further & further afield) until we found what we would both be happy to live in for the long run - until we are much much older and decide to move into a smaller place... or feck off to a warm country.

I think buying a small 1-2 bed place would work if you're early 20's and/or know you are not going to have any kids. Minimally you would have to be happy to live there 10-15 years to be on the safe side.

wordofwarning

Schiller who is considered one of the top housing economists in the World, believes you should only buy a house if you plan on living there for the next 10 years minimum. In his option, it is a consumption choice and not an investment choice. Although I don't know how he would feel about the fact, that buying and selling a house in America is relatively cheap eg low fees for Estate Agents, low property taxes, low stamp duty etc. He is right about buying a home being a massive commitment.

Im personally torn between buying an apartment to live in or just saving. I don't know where my career will be in 2 years. Do I really want to limit my career opportunities by buying an apartment and being stuck in Dublin? I know due to CGT and the ridiculous rental laws, that renting it is not an option.

Buying a house and ending up in negative equity is no longer the issue it used to be. You can get debt write offs etc. It is not desirable, but more easy to address than 5 years ago. A lot of people ended up in horrific negative equity, as they bought houses putting very little down ie deposit.

There is a massive opportunity cost to owning a home. Instead of putting money you are saying for a deposit in a tax favourable pension. A lot of people save for a house until they are in their 30s and then start saving for retirement. But with the power of compounding, it should be the other way around. While you are saving for a house, you really should be saving for retirement.

draiochtanois

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Graham

draiochtanois wrote: »

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+1

People have different housing requirements at different life stages.

I think it's entirely appropriate that people should right-size based on their requirements/needs. I'd go further and suggest property taxes should incentivise this.

the_syco

"Starter house" is how small substandard houses were sold during the boom.

Mrs OBumble

jimmycrackcorm wrote: »

I can think of several retired people that get great enjoyment and a pastime out of doing their garden and other maintenance.

Which is great while they're able for it.

But once they aren't, it turns into a huge problem. Mr O'Bumble gardens for a few customers in this category - and they're ok because they can afford it. But he's had to say "no" to others who couldn't even afford the materials to fix problems with their houses, much less the labour.

wordofwarning

the_syco wrote: »

"Starter house" is how small substandard houses were sold during the boom.

A lot of people I know brought 'starter homes' when the arse fell out of the market in rough parts of Dublin 1, 7 & 8. The houses were in bits in horrible areas. Yet in 2017, their houses are surrounded by middle class professionals moving into the areas.

A starter home in bad part of D15 is no go for. A dive in a rough part of Dublin City is not a bad decision IMO.

Heart Break Kid

Remember ypu need a bigger deposit for your second home.

MayoSalmon

Most people be lucky to actually buy their own home nowadays nevermind the nonsense starter home concept

traveller0101

newo wrote: »

We bought a two bed end of terrace house for a ridiculous price in 2007. Planned to upsize in about three years. Price dropped horrendously. We then had three children and moved to a three bed bigger house renting which we've been renting for five years and rented our own house out. Ended up being very costly due to the tax on renting out our property.

House is now out of negative equity and we are borrowing to convert it to a four bed and moving back into it. As others say there are a lot of factors to consider. I always think it's best to go with your gut feeling if possible. Difficult sometimes I know though.

So it ended up all working out?

draiochtanois

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draiochtanois

draiochtanois wrote: »

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Because you actually have space in your house for the things you want rather than simply not having the room have the things and the spaces you want or packing stuff in.

I've seen both sides and trust me when you have spent the first 24 years of your life living in a house somewhere around 2,500 sq ft and then spend some time in 3 bed (or even 4 bed ) semi's in a city/suburbs it feels like you are living in a shoe box.

LirW

My granny has a 400 sqm house where she now lives alone. The upkeep of something like this is ridiculous. When we were looking I said I don't want more than 120 max, would prefer 100, not too interested in a big garden either.
Maybe that is because I don't like hoarding tons of stuff and clutter. Works very well for us really.

Was in Monaghan not too long ago and there are a fair amount of McMansions on the market that are sitting there for a good while.

Malari

Presumably this "starter" home thing only applies to people planning one or more children? Or a few large dogs?

draiochtanois

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LirW

LirW wrote: »

My granny has a 400 sqm house where she now lives alone. The upkeep of something like this is ridiculous. When we were looking I said I don't want more than 120 max, would prefer 100, not too interested in a big garden either.
Maybe that is because I don't like hoarding tons of stuff and clutter. Works very well for us really.

Was in Monaghan not too long ago and there are a fair amount of McMansions on the market that are sitting there for a good while.

Do you mean your granny has a 4000 house? And you want a 1000 one? 1000 is very small in fairness and 4000 is indeed huge and hard to maintain. I think 2500 is a good size house. Depends on how many kids etc and if someone wants to work from home.

Hollister11

[Deleted User] wrote: »

Do you mean your granny has a 4000 house? And you want a 1000 one? 1000 is very small in fairness and 4000 is indeed huge and hard to maintain. I think 2500 is a good size house. Depends on how many kids etc and if someone wants to work from home.

He said sqm not sqft

Hollister11

Hollister11 wrote: »

He said sqm not sqft

And what?