How and why to invest in land.
As big finance snatches up single-family homes across the country, threatening to turn America into a country of serfs, every renter must consider how he will protect himself and his family financially. Homeowners too will do well to consider their real estate.
For better or worse, the wealth of a typical American family resides in their home. As a result, the home is both a shelter and an instrument of financial self-defense. Much fuss was made about this during the housing crisis in 2008. For all of recent memory, however, the bulk of one’s mortgage payment has not simply been absorbed by interest like other kinds of debt. Mortgage loans are cheap. The fundamental trouble was more perennial and banal: People were borrowing well beyond their means—egged on, against all common sense, by both consumer culture and bureaucratic whim.
Mortgages are also relatively easy to qualify for. Contrary to political pretenses, the average American has ready access to a homeowner’s mortgage guaranteed by the Federal Housing Administration (FHA). Every major bank, and many independent ones, offer FHA mortgage loans to prospective homeowners and USDA loans to rural homesteaders. These loans are offered at interest rates of a few percent, require minimal down payments of around 3%, are available for renovation projects, and are relatively easy to qualify for.
Mostly, you need to have been employed for the past couple years, you shouldn’t be spending half your paycheck on debt repayments, and your mortgage payment shouldn’t exceed about a third of your gross (before-tax) income.
If you fail one of these requirements, look for a credit counseling agency in your area. Don’t rely on sketchy online programs. Get out that moldy old telephone book and do your homework. Credit counseling is typically free or low-cost, and you will thank yourself once you’re free. Tell them about your homeownership aspirations, and they will put you on the right track.
If you meet the credit requirements, but find yourself spending half your income or more on rent or housing, don’t give up. You still have options.
First: reach out to a full-service real estate agency, an online mortgage company, or your bank. You’ll be looking to apply for a mortgage pre-qualification. Answer a few basic questions, they’ll run a check, and in a few hours or a day, you’ll have an idea of how much you can borrow. As long as your financial situation remains similar, you should be golden.
With those shockingly simple preliminaries out of the way, you can participate in the great tradition of acquiring property. Because the title is in your name, you will become a lord or lady—even if there is a massive lien against your new estate by some ungodly amalgam of state and industry. In truth, you will have done yourself a good financial deed, while laying a marginal waste to the commons. You will be borrowing potentially hundreds of thousands of dollars at virtually no interest, absolving yourself of future rents in the multiples of where they’re at now, earning tax-free capital gains on this appreciating asset, and guaranteeing yourself a years-long process where you can obtain alternative housing should sh*t really profoundly hit the fan.
It is unclear that any of this should be legal, but bless creation that it is.
We would also be remiss to overlook the very real psychological benefits to owning your own home. A gestalt shift takes place when your housing expenses—your mortgage, taxes, and interest all bundled in one payment—are not merely affordable but an outright bargain. You will always have this space, and you will reap the fruits of your labor upon it. You are not subject to a landlord’s whims. You could lose your job, or finally aim for that dream one, in the knowledge that you have taken care of perhaps the most important thing aside from health and family.
Perhaps your wife will give birth in the upstairs bedroom. Or your husband will eventually get around to renovating the downstairs bathroom with the leaky faucet. It might even make sense to buy that two-hundred-pound mahogany altar from the antique store; you will now have a place beyond a crash pad at which to store it.
So buying a house has serious financial and psychological benefits. What are the drawbacks? Who shouldn’t buy one?
Conventional wisdom says that if you’re planning to move within five years, you shouldn’t bother. This seems like sensible advice and coincides with a requirement that you occupy your dwelling for two years if you’ve used a mortgage subsidized for owner occupants.
Renting can be a useful service for students, recent graduates, or singles. But even in those cases, purchasing a home with trusted friends could prove a boon. Appalachian rustbelt towns are dotted with homes serving as punk houses or makeshift music venues. These are often quite old, with a lot of character. Several acquaintances have literally found themselves becoming accidental real estate investors as a result of a desire to party, becoming upper-hundred-thousand-aires in the process. I myself currently own my second home and am working to purchase a third. I would rather amass a dozen old fixer-uppers and country shacks than a McMansion. If life is a stage, I’m going to build my own to strut upon.
Nevertheless, it is appropriate here to remind you of a certain horror story elided a bit earlier. A bunch of people lost their homes about a decade ago, and we wish to avoid this for you.
You will have to live within your means, and even on the spartan side. After all, you intend not only to have your name printed beside a bank’s on some deed, but to seize your independence. This is not always a simple thing to do, but neither is it always as difficult as we make it out to be.
For a median salary of $50,000, this will perhaps mean purchasing a house that is no more than $150,000. In D.C., this will buy you a rat-infested closet. (And we have congressional staffers who can’t afford that!)
Implicit in this is that for many reading this, you will have to leave the City, which, so capitalized, means New York, Los Angeles, San Francisco, Seattle, Portland, Boston, Washington, Austin, Chicago, etc. Leaving one’s town, and in particular hometown, is never easy to do.
But the good news is—you’ll have to leave the City.
With a little planning, you can find a small town perhaps even more to your liking to begin with. Thousands of picturesque towns and villages remain distributed across our great country; no fewer than two dozen are within a half-hour’s drive in Western Pennsylvania where I sit. All have a history, many are quite old, and indeed all too many have suffered blight as a result of outsourcing and other forms of economic warfare enacted upon them. They all suffer still as a result of a popular culture that erases their very existence; small-town living is ridiculed on television and in media, if represented at all. And we are told representation matters.
One hundred thousand bucks will buy you a six-bedroom Victorian in some Appalachian towns. In others, 50,000 will do the same. Which means that if you deprive yourself of a poverty lifestyle on a middle-class salary in order to leave the urine-stained streets, deafening noise, and piles of litter, you might find you prefer a human-scale community: walkable and surrounded by parks, nature, and old architecture. Even if, or perhaps because, it’s a little rough around the edges. It reminds you there’s things to be done.
Once you’ve found the right town for you and yours, your next mission will be to find the right house itself. Here it pays to be tactical.
Get out of Dodge, Get into Localism
A friend once approached the development board of a rather derelict neighborhood, one with rough edges but a good foundation. Picture a flat and walkable section of the otherwise often hilly city of Pittsburgh. It’s a five- or ten-minute walk to a small business district and a funky coffeeshop. You often see people get lost there in their Audis, but some natives have been known to drive Subarus. They are urban pioneers, as it were: co-op moms with greasy wavy hair and nose rings, Fugazi dads who have aged into becoming landlords. And some—I assume—are good people.
This friend purchased a big shoddy brick house for five thousand dollars. Another bought one in a similar neighborhood for ten easy monthly payments…of $300. It can be done.
These friends would subsequently go on to become addicted to YouTube and hard labor. All their time on weekends, and many hours after work, were consumed in watching videos, learning how to wire outlets and plaster walls. After a couple years, however, they owned their home—and its improvements—outright. Once you own the bones, if you’re willing to do the work yourself, you can apply the same ingenuity and thrift to materials. Find the antiques people are discarding, the miscolored paint at the home improvement store, the scrap yards and outlets and warehouses selling fixtures and infrastructure from another world: an alternate supply pipeline of closed offices and decommissioned schools and churches.
And if you are younger parents, do not discount the free labor that your children can provide. Granted, you may find yourself with a bit too much on your plate if you’re dealing with a newborn or a child in the midst of the Terrible Twos. But a child of seven or eight can easily be put to work as a tool-fetcher or casual laborer.
With a fair bit of work upfront, but perhaps less than you think, these friends of mine—artists and craftspeople with inconsistent pay—now own a stake in their community. They are active at their neighborhood council meetings. They don’t have kids but care about the quality of the schools they fund. They host potlucks. They’ve achieved the American dream.
But while the outlines are clear, the picture looks nothing like the Rockwell painting. Perhaps most strikingly, it all reads as a bit…left-wing. This is true of most DIY or Maker culture. Consider for a minute: why should this be so? Many conservative values are apparent in working, investing, and engaging in a small community. But we have let the Left take over localism as a daily practice. This is a grievous mistake.
So reach out to your new town’s economic development board: these organizations have a direct interest in growing their town or neighborhood’s occupancy. Tell them you’re looking to buy a fixer-upper, and ask them if they have any suggestions or properties listed. Many boards have found themselves with abandoned or condemned property that is salvageable, and they’re looking to get rid of it fast.
Then you can approach the larger city or county about real estate auctions, sometimes foreclosures, seizures, abandoned or old city property. Contact banks. Drive throughout the area and take note of For Sale signs, including and especially “sale by owner” signs. Finally, you can resort to websites like Trulia or Zillow for some leads.
Once you’ve found an agent—often you’ll find yourself with a boatload of referrals from the pre-qualification process—they will reach out to the seller’s agent on your behalf. You can tour the house in most cases, ask any questions you like, and subject to agreement, have the property inspected. This part of the process could transpire in hours, days, weeks, or months. My second search took three months, whereas I had been well on my way within just a few days of starting the first.
Typically, the deal you will strike will be contingent upon the house passing inspection. This process may take a week or two to set up and can be a frustrating nightmare. On the other hand, sellers are clearly incentivized to maintain their properties in a passable condition. As a consequence, you will find the home-buying process much smoother if you find the goldilocks fixer-upper: It should require enough work to be affordable, but not so much as to fail inspection or defy your future abilities.
A piece of advice: Don’t implode upon seeing the lengthy report which will invariably list various water leaks, loose steps, knob and tube wiring, and old windows. You can handle a lot of this bit by bit yourself, over the course of years, as you acquire new skills. You can hire a handyman for others. The inspection report will become a nice little to-do list as you invest in your home. True, some issues that come up may be deal-breakers. But remember: you’re in this for the long haul. You’re saving money by going this route, and the improvements you make will be yours.
With inspection secured, your next step will be to gather financial documentation—bank statements, pay stubs, tax statements—for your mortgage agent. They’ll run a final credit report and render a decision. Common pitfalls include: the house failing to meet the value at which it is appraised, failing inspection or safety standards, failing to qualify for homeowners insurance, or title ownership issues. Much of this process occurs behind the scenes: you’ll mostly be doing a lot of emailing. After a couple months of waiting, your real estate agent will host a closing, which is when the formal transfer takes place. After you sign dozens of papers, you’ll receive the keys to your new home.
Many new buyers overestimate the complexity and duration of the whole home-buying process from start to finish. In general, from beginning the search to signing on the dotted line, you’re looking at a few months—and much of the work is done by incentivized players like real estate agents and brokers. You can work this to your advantage by taking your time during the searching process, but bear in mind that you may be competing against other bids. In these cases, the buyer willing to close first often wins. If you cultivate a patient but decisive demeanor, and can arrange for a flexible timeline, you’ll be better poised to handle any setbacks, negotiate the best deal, and stake your claim in a better way of life. Plus it never hurts to stick it to BlackRock. It just feels good.
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