Please note the image used in this blog post is by Teresa Nevic. Please also note this blog post is sponsored and to read about that, click here.
First comes love, then comes marriage. Then comes buying a home in Salem, MA because you got married there and fell in love with the city.
Wait. That isn’t how the rhyme goes? Either way, I am super excited to welcome Dan Bernal to the blog today! I have worked with him in the past over at ThingstodoinSalem.com and am thrilled to be working with him again. Today he is going to chat with us about being a newlywed, first time home buyer in the witch city.
Where should a first time home buyer even start? Do you have some general advice you could share?
When you’re a couple just living the life together you often want to be in the heart of downtown, walking distance to all the action. This comes at a considerable price. As newlyweds, it’s time to start planning ahead. If you are moving to Salem as newlyweds, consider renting for a year or so in a not so central location so you can save money on Salem’s hyper expensive downtown rent. This will allow you to explore the possibility of buying a home. Rent costs in Salem are climbing on a level where it’s often a comparable cost to own vs. rent but there are huge financial benefits to owning. There is a considerable tax credit as well as planting an equity seed that will grow your new family’s wealth starting the day you buy. For example, I worked with a newlywed couple who bought their first home in Salem in 2010 and its value has more than doubled since then with only minimal work to the home. All that equity would be gone if they had continued to rent or focused on living in the heart of downtown.
What are some ways first time home buyers can leverage this being their first home to their advantage? Are there tax breaks or things along those lines they should look up?
When you rent a home, you pay your rent and the money is gone. When you own a home with a mortgage, all the interest you pay on the mortgage is excluded from your taxable income. If you make 100k per year and pay 16k per year in mortgage interest, you are only taxed on 84k. In the first 10+ years of a mortgage you are paying mostly interest so this tax credit works as a rebate equivalent in many cases to about 1 free mortgage payment per year. Pay 11, get one free. You’ll never find that deal in a rental. Likewise, property values only really go up in Salem. The variables are how fast and how steeply they go up. So anything you buy will likely pay you a dividend in equity when you sell it. Again, you won’t find that deal anywhere in rentals.
What are smart ways for new home buyers to invest in a place that they can grow into? This might mean family plans or it could just be long term living plans.
One of the most forward thinking investments newlyweds can consider in moving to Salem is buying and living in a multifamily home. While the sticker price may seem daunting and is often more than a condo or single family home, it’s actually the least expensive and most economical of the three because you have a tenant paying rent, which at fair market value in Salem is quite high and rising. When you offset your mortgage payment with rental income, you’ll find a multifamily property the least out of pocket monthly expense of the three. There are also several very low payment mortgage options for buying a multifamily property as long as you live in it for at least a year. Remember, you were probably living in an apartment before considering this move. This just puts you in a new apartment, but now your rent is going right into your own wealth and future and so is your neighbor/tenant’s. When you decide to move on from apartment style living, multifamily homes in Salem make incredible investments because both units will continue to generate growing rental income while the property rises in value. The demand for rentals in Salem always outweighs supply. You will always have tenants, income and growing value. These properties also act as your own private bank because you can borrow against the equity you have in the property at very low rates (Home Equity Loans) to invest in new homes, your kids’ college, whatever you need.
What are a few ways a newly married couple might build up savings that could be used as a down payment?
Even before you become newlyweds, it’s wise to consider life beyond the wedding. Rather than registering for piles of material gifts you may or may not use, considering asking guests to instead invest in a down-payment fund for your first home. Sure, there’s less flash and stuff to unwrap on your special day. However, the truth is you are starting a life together and there’s no better investment in that regard than starting that life in a home where you’ll build wealth and dramatically improve your credit. This will allow you to acquire all the other stuff you want and lay the foundations for a life together.
Any final words of wisdom or advice?
Newlyweds are often gung-ho after spending excessive time, money and focus on the planning of a wedding and honeymoon. This can lead to impulsive decisions that can ultimately be costly. If you’re moving to Salem, or already live in Salem, take your time to plan your first moves as a new family. Explore the real estate landscape for a while with an agent you trust and vibe with. If you take a little time to research, get advice and plan you may get to a more ideal situation faster and with less stepping stones. This makes way more sense versus jumping into that sexy townhouse rental on the Derby Wharf that costs an arm and a leg and bleeds your new family’s resources rather than building them. You’re married now, time to prioritize the long game over instant gratification.
Thank you so much to Dan for sharing this awesome insight. I, myself, learned tons of new things in reading what he shared and I hope you guys all did, too. Congrats on your new wedding, your new exciting life together and I hope this information helps you plan for a smart future in Salem as well. If you have further questions or would like to see available properties in Salem, Dan Bernal can be reached at 617-275-3291. He can also be found online at DanBernal.com.
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About Dan Bernal
Dan is a top producing agent providing concierge level service to buyers, sellers and investors throughout eastern MA since 2006. He works closely with clients to ensure they’re fully informed, expertly advised and supported with the best available resources and services.
Whether a first time buyer, a luxury seller, a rental/ rehab investor or anything in between you can rely on Dan’s extensive experience, unswerving attention, constant availability and honest advice. Dan is a certified relocation specialist, recipient of numerous sales awards and was featured on the popular HGTV show House Hunters twice.
Dan holds a B.A. in Classics from Tufts University and lives with his family in Salem, MA where he is also an enthusiastic foodie and performing guitarist.