I posted that I wanted to write a Millennial home buying guide a while ago and I'm finally getting around to writing it. As an accidental real estate investor, I've made a ton of bad decisions and a few good ones too over the years, so hopefully you'll heed some of my advice.
We sacrificed items 3 and 4 for a lake community in semi-rural New Jersey
It's all about location, seriously. Don't skip over this part and buy a cheap house in a bad location. You're just gambling here. Your needs and current arc in your life will dictate the location you'll need. Here are some key things to think about.
- What does the surrounding neighborhoods look like
- Do you have access to public transit
- Is it a walkable community
- Are there grocery stores, restaurants, bars, etc on a Main Street
- Would you want to spend a Friday or Saturday night there
- If you plan on having children, what are the schools like
You should never buy a house in a low point or where you can actually see a year round flowing stream.
These were the questions my wife and I asked each other when we selected where we live. We sacrificed items 3 and 4 for a lake community in semi-rural New Jersey because it works for us and our careers. You should do the same.
Now that you have the town, city, and neighborhood pinned down, let's talk about another crucial point: the actual location of the property.
We live in semi-rural New Jersey and the important thing for us was to live in a wooded area surrounded by trees, wildlife, and lakes. The area is somewhat hilly with small hilltops and several streams.
As a former civil engineer and site developer, I always looked the how the property was situated to the surrounding area, most notably I was concerned about flooding.
You should never buy a house in a low point or where you can actually see a year round flowing stream. There's a high probability that you will be in danger of being flooded out. There are two bits of terminology that you must understand about flooding and it's called the Floodway and Flood Hazard Area (FHA).
The floodway is where the most dangerous flooding occurs. It's where the water has its highest velocity and it's where you see houses float by. It's normally against the law to allow houses to be built or sold in the floodway, but every state will be different.
A lot of people make the mistake thinking that a 100 year flood will occur once in 100 years and then wait another 100 years.
The FHA is where the flood waters spread out to because of the elevation. If the floodwaters reach 100 foot elevation mark and your property is 99.5 in elevation, then you will have 6 inches of water on your property.
Insurance companies will sell you flood insurance for properties in the FHA but it's an added expense and it really sucks if you have to clean out your basement on a semi-yearly basis.
100 Year Floods vs 10 Year Floods
There are different types of floods and they depend on the 'return year.' The return year is a statistical measure that says a 100 year flood has 1% chance of occurring once a year at that level of intensity. Likewise, a 10 year flood has a 10% chance of occurring once a year at its level of intensity.
A 10 year flood will usually have a lower flood elevation than a 100 year one BUT they can occur both in the same year. A lot of people make the mistake thinking that a 100 year flood will occur once in 100 years and then wait another 100 years. This mistake has been the undoing of many a homeowner, don't make the same mistake.
In fact, Hurricane Sandy rewrote ALL the flood rules for New Jersey.
The best bet is to always buy a property above the 100 year flood elevation AND out of the FHA. The 100 year flood elevation and FHA are always two different elevations. You should always take the higher elevation and add 1 foot to it, this way your house will be out of it for years to come.
Example Flood Calculation
You've determined that the base flood elevation for a 100 year storm along this gorgeous stream is 150 feet. They FHA is a 152 feet and your house floor elevation is 151 feet. Should you buy it? NO! A double NO would be if the house has a basement below 151!!
Another scenario: The base flood for 100 year storm is 150 feet, the FHA is 152 feet, and your basement elevation is at 152.5. Should you buy? Perhaps and it depends on the local laws. In New Jersey you need to have a minimum of 1 foot above FHA to comply with the law (always consult a licensed engineer in your state for review).
...if you find a great property and it appears that it's on the edge of FHA then I suggest you consult a local licensed surveyor to give you a 'Flood Certification.'
Why is there a 1 foot minimum? It's a requirement because people develop, rivers change, etc. The earth is dynamic and I've seen properties that were 1 foot above the 1970 FHA only to be reclassified as being in the FHA after Hurricane Sandy in 2012. In fact, Hurricane Sandy rewrote ALL the flood rules for New Jersey.
FEMA and Flood Locations
FEMA has a great website so you can check if your future property is in Floodway or FHA. This is just a tool for you to check and you can quickly eliminate any potential contenders. However, if you find a great property and it appears that it's on the edge of FHA then I suggest you consult a local licensed surveyor to give you a 'Flood Certification.'
A Flood Certification is a detailed measurement of all your property corners and comparison to the FHA. The FEMA maps are always approximates and the 'Cert' will give you an accurate measurement. This is usually done as a matter of course for properties the mortgage company feels are 'questionable.'
No Flood, No Problems, Right?
You've found a property and it has all the great qualities you want, plus it's nowhere near a flood area. Great! What else can trip you up?
Is the basement waterproofed?
You should look at how the property is situated to the road. Is your driveway long or short? Is it hilly? This is something to consider if you live in cold climates as ice and snow removal are a pain if you have to shovel uphill or you can get your car out of the garage because you'll slip into a ravine.
Some other things to consider is will water flow toward the house when it rains? If it does, will it flow around the house? Is the basement waterproofed? Does the basement have sump pumps? As a rule of thumb for me, I never buy a house with sump pumps. If power fails and it rains heavy, your basement will probably flood.
Improper site drainage can cause a lot of problems for a homeowner. Always look for good site grading (how the land directs water) away from the house. This can be a money and sanity saver.
Trees, Retaining Walls, and Landscaping
This section is for people who're buying standalone properties but you should be aware of this if you buy a Condo and become part of a Condo Association. Not so much for urban (city) dwellers.
The location of tress can bring about very welcome shade in the summer and make for a good quality of life all around. While this awesome, we must always remember that trees are alive and can get sick and die rather quickly. How the trees lean and their location relative to your house can be of concern. You don't want dead trees close to the house.
At first glance it looked like a jungle, but that's because the previous owner died and the house went to auction.
The house I live in was struck by two trees before we looked at it. There was slight roof damage from one in the front and the rear deck was completely taken out by the second. The deck was repaired in the back but the front roof needed work. When we moved in we decided to remove all potential trees that were leaning toward the house. Sure it cost a few $1,000 for tree removal but we saved several more $1,000's in repair costs later.
Another costly headache is retaining walls. Depending on your land is (typography), you might have retaining walls to 'retain' the soil and your land. Usually retaining walls are a last option because they're expensive to design, install and maintain. If a retaining wall fails a few years after you bought the house, then you're probably looking at $50,000 or so to replace and fix.
However, some retaining walls are generally better than others. If you see boulder retaining walls, run. These walls are typically not designed by an Engineer and were 'built in the field' by a backhoe operator. They're commonly referred to as gravity walls because the mass of the stones hold back the soil. They commonly fail by sliding out or sinking into the ground they're sitting on.
If you see engineered block walls like Allan blocks and they're over 4 feet tall, then you should check with your local building department to see how they were built. If there's a building permit for them, then it's a good sign. If they use something called geotextiles, geogrid or a term like MSE wall, then the walls are very robust.
Engineering walls, or MSE (Mechanically Stabilized Earth) walls require a lot of thought and design behind them. The Engineer will evaluate the soil and its strength, how deep the reinforcement runs. This makes the walls strong and last a very long time. These walls are designed to handle soil and water pressure and they look really nice IMHO.
The last thing I want to mention is landscaping. A house that's nicely landscaped is a good thing. Someone took great effort to make sure that their surroundings were pleasing and it's usually an empirical measure that the property has been maintained.
There are few guidelines to always consider if the property has a well and septic.
Old landscaping is something I look out for when looking at abandoned properties. The property my sister lives in had underground sprinklers and overgrown flower beds and a messy backyard. At first glance it looked like a jungle, but that's because the previous owner died and the house went to auction. After examining the property, we saw the weed covered flower beds and the sprinkler system. Sure enough the house was retirement home for the previous owner and he spent his time work in the garden. He was quite handy inside as well and you can see that he took care of his property.
Electric, Sewer, Water, Internet, Oil
Perhaps the biggest 'deal breaker' for many first time home owners is utilities. I'm not so overly concerned with electricity but access to a reliable Internet provider is crucial for me. Chances are, it will be for you too.
There are a few more other gotchas here as well and they have to do with your water and sewer service. You have nothing (usually) to worry about if you have municipal water and sewer, you just have to pay the taxes. However, if you have well water and septic system (as I do), well then things get a bit more interesting.
A lot of people shy away from wells and septic systems because it sounds so complicated and dangerous. There are few guidelines to always consider if the property has a well and septic.
The water is treated with coconut fibers and shells and comes out clear.
Wells can be a great source of delicious tasting water BUT you should get it tested. A test runs about $200 and it will tell you the pH and if there's any potential oil tank contamination (see Oil tanks below). Check to see if the well is 'cased' or lined. That's a good sign because it means that subsurface contamination, if it's shallow, has a lower likelihood of contaminating your water.
This leads me to another side bar that is very, very important. If your house is heated by oil, make sure the oil tank is above ground. Removing an underground oil tank that's leaking is a massive cost and nightmare. Just don't do it.
A lot of people are scared of septic systems because they get abused and fail after 30 years or so. Every house's mileage will vary but the cost of replacing a septic system in NJ ranges from $20,000 to $50,000. I've designed and installed a few septic system with the most recent one being an EcoFlow unit.
The EcoFlow units are cool and these types of 'mini wastewater treatment plants' are becoming the norm in lakeside communities. The water is treated with coconut fibers and shells and comes out clear. It's not safe to drink but these systems use almost no electricity (depending not the design) and the water goes into the ground very clean. They're reasonable priced but your underlying soil structure will drive the design and cost of a new system.
I suggest always getting a qualified septic system inspector to check out the system before you buy the property.
I focused mainly on single family dwelling above, but the same things will apply in an urban setting, especially the proximities to schools, grocery stores, transportation, etc. Flooding does occur in cities, especially the ones near large rivers so being aware of where you are and how the water drains off is important.
Granted, the problems of water, sewer, and other utilities might be less important as living out in the woods, you should at least be aware of their status and how they hook up your building.
I will probably add to this post over the coming weeks as I remember more things BUT I will make this disclaimer: Always consult a licensed inspector, local professional engineer, surveyor, and attorny before you purchase a house. Your realtor will help you in this regard.