With rent prices shooting soaring across the country, many young Americans who were previously happy renting while they saved for a home are now turning to other options.

One common solution is a starter home. If you want to keep your monthly mortgage prices low while being able to build equity and slowly save for your “forever home.” a starter home can be a great option for first-time buyers.

When does it make sense to buy a starter home?

Buying a home means mortgage payments, home maintenance and repairs, and closing costs. However, they can also be a great introduction to the responsibilities of homeownership.

Better yet, starter homes allow you to build equity that can be used toward the down payment of your next home, something that first-time buyers often struggle with. This could help you secure a lower interest rate and avoid costly private mortgage insurance (PMI).

Sounds great, right? But when shouldn’t you buy a starter home?

It might not make sense to buy a starter home if you don’t plan on living in it at least 3-4 years. You might find that the cost of renting is less than that of your mortgage payments and closing costs if you don’t live in the home long enough to reap the rewards.

It also might not be a good idea if your family is going to outgrow a small home in the next few years for the same reasons mentioned above. That makes it all the more important to discuss your long term plans with your spouse before considering a home.

Things to look for in a starter home

1. Resale value

One of the most important aspects of your starter home should be the ability to resell it in the future. Now, there is an endless number of factors that go into the marketability of a home. Key factors include the condition of the home and keeping it well-maintained, as well as the location of the home. Buying a starter home in an area that will attract young professionals down the road is typically a good investment.

2. Small size = low price

It probably goes without saying, but finding a home with a low price, at the expense of square-footage, is most often a smart choice when it comes to starter homes.

Small homes are cheaper to buy, cheaper to heat, and cheaper to maintain. However, since housing prices are trending upward, you’ll likely still see a positive return on your investment in ~5 years time when you’re hoping to buy again.

3. Reasonable home improvements

If you can spare the time, buying a starter home that needs some work can be an excellent investment. It can be more difficult later on when you have a large family to care for and less time to focus on making improvements.