As housing affordability improves and the shortage in existing homes continues, homebuyers are turning to new construction. As a homebuyer, you may be tempted to jump on the first available new home that suits your family, but before you do, there are three major mistakes you should be aware of.

Don’t visit builders alone. If you visit builders on your own, they have no obligation to deal with your real estate agent, and you will have lost the opportunity to have an advocate. Make sure you sign the builder’s visitor log and include your agent’s name and contact information. Builders use their own contracts that limit their liabilities and may not be in your best interests. Your Berkshire Hathaway HomeServices network real estate professional can vet your builder for you, help you save money, and help you through the underwriting process to closing. 

Don’t skip the inspection. Just because a home is new, doesn’t mean it’s without problems. A recent news report found that some homebuilders are “cutting corners” to produce homes faster. Protect yourself by demanding an inspection that covers all systems, fixtures and appliance in the home.

Don’t buy the model home. Model homes feature the most luxurious features to tempt you into adding upgrades. If these upgrades are done during the building process, and not after the home is completed, you’ll save a lot of money and prevent costly delays. Make sure the luxuries you get are in line with other homes being built or completed. 

Homebuyers are feeling the sticker shock of higher prices, but it’s not just inflation. They want bigger homes. In 1949, the average size of a new single-family home was 909 square feet, while homes grew to 2,480 square feet by 2021. Homebuyers want more than they had before, including more space, energy-efficient appliances, and smart home technologies, all of which is making homes more expensive. 

But how much living space does a family really need? According to the National Association of REALTORS®, a typical home purchased recently is 1,800 square feet with three bedrooms and two bathrooms and was built in 1986, but that may not be enough space for some homebuyers. While it’s totally subjective, a good rule of thumb is that each person should have 200 and 400 square feet of living space. So, a family of four would be comfortable with a home of about 2,400 square feet.

To help you choose the right-sized home, consider your family’s needs. Small children can comfortably share a bedroom, but teenagers need more privacy. Aging parents are safer in single-level homes or a downstairs owner’s suite, preferably with a separate entrance and living area. You may need more space if you’re working from home and need a home office, a playroom for kids, a bigger kitchen, or an owner’s suite with his and her baths.

Whatever you choose, make sure the layout and square footage also aligns with how much you want to maintain and pay for utilities.

Who wants to make an investment that doesn’t yield a return? Certainly not real estate investors. They have formulas to assure their success as much as possible. One favorite is the one percent rule.

Rocketmortgage.com explains that the one percent rule “measures the price of the investment property against the gross income it will generate.” That means that an investment must generate at least 1% or more in rental income based on the original purchase price. The rule continues as the investment property appreciates in value, which means the potential for profit in the form of higher rent is even greater.

To find a property that will be profitable, multiply the purchase price of the property by 1%. Another way to calculate it is to move the “comma in the purchase price to the left two spaces.” The result should be the minimum you charge in monthly rent. If the property requires any repairs, you’ll also want to factor them into the equation by adding them to the purchase price, then multiplying the total by 1%.

If you want to buy an investment home for $300,000, you should be able to collect $3,000 in rent. Ask your Berkshire Hathaway HomeServices network agent to provide a comparative market analysis of nearby similar properties so you can compare purchase prices and rental prices for those properties.

For greater accuracy, include the costs to renovate and repair the property, and to bring it up to modern building codes for safe habitation. 

Homeowners’ associations (HOAs) are formed by the owners of units within a community to manage, maintain and improve quality of life for residents and increase their property values. And there are four things all HOAs hate—strangers, traffic, safety issues, and anything that might cause declines in property values, such as home-based businesses.

Out of 32.5 million small businesses, about 19 million are home-based or began at home, according to The U.S. Small Business Association. Following the pandemic, many workers found that they want to be their own bosses, but HOAmanagement.com reports this is a growing issue for HOAs that prohibit homeowners from using their properties for commercial purposes.

While it’s fine to have a home office business such as accounting or search engine optimization, your HOA won’t allow you to use your home for obvious commercial use such as manufacturing, storing large equipment, or making or receiving frequent deliveries. HOAs don’t want people coming and going to your house or for trucks and cars to crowd the streets and parking spaces. It makes your neighbors feel put upon, inconvenienced, unsafe, and less confident in the security of their community.

As an existing homeowner, you should have a copy of your HOA’s governing documents and by-laws, also known as CC&Rs—covenants, conditions, and restrictions—so you can see where your HOA stands on the issue. If you’re considering choosing a home in an HOA-managed community, your Berkshire Hathaway HomeServices network agent can help you obtain the CC&Rs and other documents you’ll need.