How Much Should you be Spending on Property Every Month
When Mr. and Mrs. Chike were planning to buy a house some years back, they had a budget in mind on how much they will love to purchase a real estate property but the properties they saw that were up to their standard was way beyond their estimated budget. They had a choice to either go for a low budget property which is within their budget or get a loan to add up to what they had so they can afford to purchase a property they love. They did all that was required to get the property of their dreams but had no idea the bulk amount of money they will need to maintain the property, pay bills, and settle their loan monthly; it was way beyond their monthly income and they had to use 90 percent of their income monthly to settle bills until they could find relieve after a few years.
Many people have been in a similar situation as Mr. and Mrs. Chike and most have found a way to scale through. Experiences like theirs have taught a lot of new real estate investors a lesson on making a future plan on their spending while acquiring a property they can afford.
Buying a home could be one of the biggest purchases in the lifetime of many people and purchasing a real estate property in Lagos is not easy but can be very possible if you purchase right. If you are wondering how much you should be spending on a property every month, then here are tips to measure how much expenditures you will be making monthly on your property.
Rule of thumb
If you purchased a property without directly taking a loan, then you can mark out a certain percentage of your income for maintenance and taxes depending on the property under your acquisition and this can help you save a lot since there is no percentage of money going out of your income for loan repayments. So 5 percent to 10 percent of your income can go into taxes and maintenance.
On the flip side, if you purchased your property with a loan, mortgage payments will likely eat a bulk of your savings. The general consensus from financial experts and planners suggests that expenditure on property loans must exceed 40 percent of your monthly income. Most lenders will make this calculation based on the size of your income, the size of your down payments, the stability of your income, credit score and other factors, but ensure that they do not put much pressure on you by making you bite more than you can chew.
Avoid the mistake Mr. and Mrs. Chike made. Do not purchase a property that is 100 times more than your budget because paying huge debts for years can be frustrating. Crunch your numbers before you even start looking for a home so that you are aware of your budget. This will also make it very easy for you to shortlist your options on a home purchase.
How much should you spend on your property monthly?
The answer to this question depends on how much you earn monthly. Calculate your true expenses every month. Write it down on a piece of paper and include the tiniest details rather than make assumptions. List every expense irrespective of the size and see how much you can realistically spend on your property every month.
If you are also reducing debts especially from a loan you took, calculate how much interest you would also be paying. If you took a loan from a bank with high-interest rates, it can be burdensome to pay back and that is why it is advisable to get a loan from a bank with very low-interest rate whenever you want to take a loan because this will save you a lot of money later in the future.
If you are renting out your property, the money you make from the rent can cover up for the most part of the expenses you will be making monthly but renting out your property is a thing of choice. While figuring out how much to spend from your monthly income, do not forget to also save for future investments which include; education funds, retirement, pursuing your passion as well as daily upkeep. In other words, do not spend too much on a house and ignore other things that are also very important.
If you are going to be a property owner, all these expenses should be taken into consideration; loan insurance cost if any, property taxes, maintenance fee, repair costs, and stamp paper duties. If all these expenses are going to take up a huge chunk of your monthly income before you purchase a property, then it will be wise to re-strategize and play safe.
The Positive Side
Despite the fact that it took Mr. and Mrs. Chike a long time to take the huge debt off their shoulder, they currently started reaping the positive results of their investment and they will keep getting many more returns on their investment.
Having your own house helps you save on rent and tax and your income can increase by the year within a short period of time which will cover up for the stress and expenses you have gone through for the sake of your property. Remember to save up for your personal goals while also spending some of your money on your property. Planning is an important aspect of our general wellbeing. While it is awesome to have your own home, it is also important that you are not carrying a lot of financial burdens as regards to spending on your house.
Financial planning is an important aspect of life, especially in the real estate world. You should plan before you invest into any real estate property and you should also plan ahead for the future so you can be able to manage your property and reap the returns on your investment. It all depends on you and your monthly income. Make your calculations smartly and make sure you do not spend so much on your property and neglect basic necessities.