Dreaming of homesteading? Find out how to go about starting a homestead on a budget! With these tips, you can make that homestead dream come true!
Many of us dream of a homestead. This has been something that I’ve thought about for many years. My husband Joel and I were recently able to buy a little piece of property in Southern Oregon. We are in the process of turning it into a mini permaculture paradise, and it’s been such an empowering feeling.
This is actually the second property that we’ve owned. The first was a 14-acre property in the Ozark mountains of Arkansas. Between these two totally different properties, we’ve learned a lot! Here are my top 10 tips for buying and starting a homestead on a budget.
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Choose Your Location Wisely
This is huge; there are so many factors involved. Weather, proximity to family and friends, and affordability are three things to consider here.
- Is it important for you to be near family and current friends?
- If it is, how close do you want to be?
- What kind of weather do you prefer?
- Do you enjoy four seasons, or do cold and dreary winters get you down?
- Can you handle humidity, or do you prefer arid climates?
Another thing to consider: Natural disasters for the areas that you are interested in. Make sure you are capable of dealing with those.
Once you have it narrowed down, it’s time to think about your budget. Try to choose an area that meets the first two criteria within your budget. This can be difficult; you may have to bend a little here and there to make it work.
When we first decided to move to Arkansas, we thought it was going to be the best place for us. The land was super cheap, it had a long growing season, and the people were nice. I didn’t think I needed to be close to my family on the west coast. A few years later, we decided that we hated the summer humidity and winter ice storms. The tornadoes scared the you-know-what out of us. And it saddened me to be so incredibly far away from my family.
We did a whole lot of research, and ultimately chose Southern Oregon for it’s relatively mild climate and proximity to my family. While it’s not nearly as cheap as Arkansas, it’s also not outrageously expensive.
Related: Building and Living in a Tiny House
This can be tough, as it’s always tempting to just buy a place on a whim in an area you think seems nice. But is it, really?
Unless you are already living where you want to buy and know that it’s the perfect place for you, it really makes a lot of sense to rent for a while first, just to feel the area out.
I suggest renting for a whole year so that you can get a feel for all of the seasons and really get to know a few people.
This will also give you time to research the going rates in different areas nearby, and get an idea for specific areas that are more affordable. Lastly, and most importantly, it forces you to not rush into buying anything.
We went out to Arkansas with a plan to buy, but no place to live in the meantime except our little trailer. This pressured us into buying something that wasn’t ideal for our situation. It was cheap, but we didn’t think a lot of things through, and ended up wishing we had gone about it differently. If we had rented in the area first, we would have realized that it just wasn’t where we wanted to be.
Get a Job… and Keep it for a While
This might seem a little obvious, but if you’re trying to get a home loan they really want to see stability and job security. You usually need to have had a real, continuous job for at least six months for lenders to even consider you.
Self employment doesn’t count as income unless you can provide tax records with stable income for three years, and the same goes for positions that rely mainly on tips (such as restaurant servers). So, while you’re renting and analyzing the weather and the local housing market, you should also get yourself a day job.
We had a complicated job history of working seasonally in Yosemite National Park for many years before renting in Southern Oregon. Since we moved around a lot with long periods of unemployment, we basically resembled a couple of vagabonds on paper.
We both had recently become employed when we started looking at properties to buy. The first thing our mortgage broker said to us was, “Don’t quit your day jobs!” This was tough, especially for me because I also worked from home as a blogger (with income that couldn’t be included). I stuck it out and it eventually paid off.
Make a List of Homesteading Wants vs. Needs
This is a simple concept, but not always an easy task. Sit down and make a huge list of everything that is starting a homestead on a new property. Then go through that list again, and categorize each item into “needs” or “wants.”
If you would like two bathrooms, but one will work, then two bathrooms goes in the wants list. If you have a larger family and two bathrooms is an absolute necessity, then it goes in the needs list.
- The size of the lot and house
- Potential animal housing
- Its suitability for growing food
- Type of home (are mobile or manufactured homes okay?)
- Proximity to jobs, family, or the nearest town
- Maximum price that you’re willing to pay.
It can also be for more specific things for your own particular situation. For instance, do you need a place for your large RV or boat? Is does accessibility for your alter-abled family member a requirement? There are lots of things to think about, and now’s the time to hash it out. (It’s also your time to plead for your “need” of a hot spring on the property.) It is important to be realistic, however.
Once you get the needs list made, stick to it! Don’t consider properties that don’t meet every need (with one exception, see the following section), and when properties have some of your wants think of it as a bonus.
It’s ok to amend the list. You might realize that you listed something as a need for starting a homestead when it’s really more of a want. If you find more than one property that has all of your needs, that’s when you move on to your wants list (come on hot spring!).
We talked about making a wants and needs list long before we actually did it. After finally sitting down and making it happen, it made searching for homes so much easier. Some of our needs were: at least a 1/2 acre of property, one outbuilding in place, a place to grow our own food, and at most a 30-minute drive to a city where we could find employment.
We absolutely did not want a mobile home, as we had a bad experience with the one we had in Arkansas, with one exception – if the property was otherwise spectacular we would consider a mobile home if it was what we deemed as livable.
One special need that we had was that it had to have the possibility for us to have renters for extra income, either in a separate studio unit or an extra room in the house with a second bathroom. We ended up getting everything on that list, with the exception of the 1/2 acre…
Go smaller when starting a homestead
The one item on your needs list that I recommend you being flexible about is the size of your property. It’s temping to want acreage. And it can be affordable depending on your location. But in many regions it’s way beyond most budgets.
Make peace with the fact that it is possible to homestead on a smaller lot, even a regular city lot. I know it’s not what is typically pictured as a homestead, but think of it this way – a small homestead is better than no homestead.
We had 14 acres in Arkansas that we got for $62k (no joke), and in certain places in the country, that’s how it is. But, it turns out that it wasn’t where we wanted to be. Property for starting a homestead in southern Oregon is more expensive, though, so we originally started looking for 2 or 3 acres when we were property hunting. While we did find some in our price range, there was usually something terribly wrong with it and the house was often completely run down.
So, we decided to be realistic. We opted to look at regular sized lots in a small town that was within the area that we had chosen. That’s what we eventually ended up getting. While it’s not our total ideal, we are so happy to have a place that is actually ours.
It Doesn’t Have to be Your Forever Home
Let’s say you have to bend a little on the size of your property when thinking about starting a homestead. Or you’d like to have a place that has more of your “wants” in the future. Remember that you can sell later on down the line when you might be in a better financial situation. While I do recommend renting for a little while, renting long term doesn’t make sense when you could be gaining equity.
So get something modest that meets your needs now, and upgrade to you dream property later on. You may even have to do this in several steps, but you’ll get there, I promise!
We decided to be real with ourselves and buy a house that needs a little work on a smaller lot. Our plan is to fix it up and remodel over the next 2-3 years. Then we’ll sell it for a profit and get a bigger property on the next go round.
Don’t Buy Raw Land
This is a trap that many of us fall into when first starting a homestead search. You will see 40 acres of raw land for an incredible deal, or 10 acres for even less. It’s exciting to think about building your own home. Exciting to think about making a property exactly how you want it.
While it seems like it could be a budget friendly way to start a homestead, there are numerous problems with buying raw land.
First of all, raw land generally won’t finance with traditional loans. More likely, you’d have to pay for it outright. The one exception to this is if you can get it with owner financing. (Read more about this below.) Raw land is almost always in very difficult to reach locations, and often has no road access.
Then you need to think about the investment for starting a homestead and getting it up and running. You will most likely have to dig a well and install a septic system (including getting permits). And that’s before you even have a house to live in. Don’t get me wrong, it is all possible, but not usually for someone on a tight budget.
We have thought about purchasing raw land on more than one occasion. We always end up back at the drawing board, though. It never really seems feasible for starting a homestead in the long run. Though I do still dream of totally going solar and living off the land in a yurt…
Look into Government Loans
There are two types of low-income loans from the federal government: The FHA loan and the USDA loan.
These loans require minimal or no down payment and have low interest rates. They do have many restrictions. For instance, the USDA loan requires the property to be in rural area that they designate. You can see a map of those areas here: USDA Loan Property Eligibility Map.
You also can not get a mobile or manufactured home with a USDA loan. There are some drawbacks to these loans as well, such as high mortgage insurance. Talk to your lender or a mortgage broker to see if these loans are right for you.
We ended up buying our property in Southern Oregon with a USDA loan. It took a lot of work and time to find a place that met all of their strict requirements.
We are happy that we stuck with it. We paid zero down payment(!) and have a very low interest rate. We used a mortgage broker who was very knowledgeable about these types of loans. She knew how to do all the stacks of paperwork involved. We couldn’t have done it without her!
Consider Owner Financing
Owner financing can be tricky. It is a viable option if you have bad credit or are interested in buying raw land. (See above for my thoughts on that.) It also works for a property that otherwise can’t be financed with traditional loans.
Basically, you enter a loan deal directly with the property owner. There’s no bank or lender involved in the middle. There can be risks if it’s not carried out properly, however. I would recommend getting a lawyer who is knowledgeable with these types of loans.
They typically require a large down payment. If you default you can be totally out of everything that you put in. Make sure to do your research and that you understand everything that the contract entails before signing!
Our story: We bought our 14 acres in Arkansas using owner financing, as that is the norm around that area. We had the help of an escrow agency.
They made sure all the paperwork was done the right way. In the end it worked out very well for us. We ended up selling that property. Now we get monthly payments directly to us from the buyers, since we financed it for them.
Homestead Where You Are
Last but not least, even if you can’t afford to buy a new homestead, start! I think everyone should homestead right where you are and within your means. Many of our neighbors have backyard chickens, food gardens, and fruit trees, and those are great places to start.
Even if you live in a small space or an apartment, you can grow veggies in pots on your balcony or even in a sunny windowsill. You can also get a space in a local community garden.
Starting a homestead — even if you don’t have the “ideal” homesteading property — is possible. Being a homesteader is a mindset, no matter where you are.
Everywhere that we’ve lived in the past five years or so, we’ve turned into a little mini homestead, even when we were just renting.
We always plant a garden, even if it’s small or in containers. There have been times when we’ve lived in a trailer on the road, and we had potted plants with us and I would grow sprouts for us to eat. The main point for us has always been, “just start homesteading!”
I hope these 10 tips for buying and starting a homestead on a budget help you on your journey! Please let me know if you have any more tips, I’ve love to hear your thoughts.
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