Buying a home for the first time is stressful and expensive.
And thanks to flat salaries and the skyrocketing prices of fixed costs like college, health care and rent, millennials are buying far fewer homes than the generations that preceded them.
But the young people who are able to purchase a house are making one crucial mistake: They're jumping straight to large new homes without considering smaller models or fixer-uppers.
Dana Bull, a realtor with Sotheby's in the Boston area, calls the millennial homes of choice "starter castles." Those homes are often stunning, she tells CNBC: "Whether it's in the suburbs [or not], they're buying properties with new construction, new developments, everything is done to the nines."
"I think that's great if you've thought about the financial situation and your top priority is having a beautiful place to live that you can enjoy," she says. "But I do think that millennials kind of do themselves a disservice if they don't understand how the numbers work with a fixer-upper."
As a 28-year-old real estate agent, Bull understands the millennial perspective towards home buying. You've saved up and want to get the best deal for your money. But she often sees younger buyers fail to explore what else is out there.
"The biggest mistake isn't that people are buying starter castles, it's that they aren't exploring their options, and they're making kind of a knee-jerk reaction to based on perhaps what they know," Bull says.
But any young buyers with the drive and interest in making a few renovations themselves could benefit from customizing a fixer-upper, which are often much cheaper than newer models.
"If you're buying new construction, all new new new, the second you move into it, it always depreciates in value for a little bit," she explains. "That's different from a fixer-upper where you can go in and you can add value and get the property that you want while reaping the financial benefits of taking the property from zero to 10."
However, it's important to know what you're getting into with a less-than-ideal abode. Home buyers should always do their research first to make sure the renovations are something they're able to handle.
She warns against becoming "somebody that just opts for the fixer upper and doesn't consider the impact that it's going to have on their lifestyle or their wallets as they're living through the renovations and construction."
Millennials aren't the only ones making the the mistake of looking past homes that aren't perfect. Even seasoned homeowners can get caught up in the allure of a certain neighborhood or the grandiosity of a big, modern home.
Cathy Derus, a CPA and founder of Brightwater Financial, advises first-time buyers to work with their realtors to explore new neighborhoods and to be intentional about what they're looking for in the house itself. While there's nothing wrong with dreams of a newly-renovated space, sometimes a fixer-upper offers the right price in the right place.
She says that, while you need to be honest about the types of DIY projects you can take on, it's often worth it to "buy a home that needs a little bit more work so that you can personalize it yourself."
You don't want to blow your budget because you're fixated on small details that could be added or updated later, such as granite counter-tops or glass shower doors.
At the end of the day, "there's no right or wrong answer," Bull says. "It's just about knowing all the different options."
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