The #1 Thing You Need to Ask Yourself Before You Buy a House

How do you decide if buying a house (or fixing it up) makes sense for you? That's the question posed on this week's Money Confidential by Jordan (not his real name), a 38-year-old in Queens who recently had a bit of a real estate adventure.

Jordan and his family opted to buy a newly renovated two-family home, with the idea of renting out the other apartment for income. But he soon found that he'd bought a house with some major unforeseen issues. "We started to have all these red flags before we even closed," Jordan says. "And in two months' time, we had a bill of over $45,000." That was to fix plumbing issues, repair heating units, and fix a problem created when the flippers he bought the house from failed to put a waterproof sealant beneath the shower.

He's concerned about his ability to recoup these additional costs. "I am worried about all of the money we've already put into this property in such a short amount of time, knowing that this was never going to be something we were going to stay for the long tenure," Jordan says.

To get some advice for Jordan on how to make decisions regarding a home purchase, Money Confidential host Stefanie O'Connell Rodriguez turned to real-estate investor J Scott.

And he posed the big question that you need to ask yourself before you decide to buy a house: What is the purpose of this home purchase? "Start with the end goal in mind," Scott says. "Think about why you're purchasing. Think about where you're going to be in the next year or two or five, and think about what you plan to do with the property once you're done living there."

While home prices are steeply rising now, there's no guarantee that will continue—and with the costs associated with selling (realtor fees, taxes, inspections, and more), you could end up losing money if you sell within a few years of purchasing.

And when you own your home, you're looking at time and financial commitments, as far as upkeep. "Any time you're buying a property, you should be thinking about the functional things you need to address," Scott says. "Those are going to be the safety concerns, the things that impact your day-to-day living."

"The other half is the aesthetic stuff—like old outdated countertops," he says. "If they're functional, the inspector's not going to say, 'Yeah, you really need to get upgraded granite countertops.' Those aesthetic things may need to be kept up to date for resale value, though."

Functional problems, like a leaking roof, could make your home unsellable, if you're looking to move. "A lot of times the buyer isn't going to be able to get a loan on the property if there are these big functional issues," Scott says. "So literally fixing these things can make the difference between your ability to sell the house or not sell the house."

If you are buying a new (or newly updated) home, ask about any warranties available. And always ensure that you get an inspection, and choose a really good inspector to look for any red flags. If they find something that you can't cover—like a roof that's nearing its end of life—consider asking for money to be placed in escrow or a reduction of the purchase price to allow you to cover the repair.

And sometimes, even if it doesn't make financial sense to purchase a certain house, it may make emotional or lifestyle sense. "When it comes to the house you're living in, it's not about the money at all," Scott says. "It's about having a place for your kids to grow up and being in a good location. It's more than just an investment."

For more advice on buying and caring for your home, check out this week's episode of Money Confidential, "The #1 thing you should ask yourself before you buy a home," on Apple podcasts, Spotify, Amazon, Player FM, Stitcher, and wherever you listen to your podcasts.

Read the full transcript.