Getting on the property ladder is probably the biggest financial leap of faith most people will make in their lives so the pressure of getting it just right is oh so overwhelming.
But the good news is even the property gurus admit they don’t have all the answers.
“The thing to realise is you’re never going to have 100 per cent of the knowledge. Even the experts don’t have 100 per cent of the knowledge and even the experts don’t know what’s going to happen in the future,” says buyer’s advocate Chris Gray, CEO of Your Empire and host of Your Property Empire on Sky News.
“There are so many statistics that the majority of people get so confused they don’t take any action,” he says.
But there are critical questions you need to ask yourself to make sure your purchase is the right one.
THE BUYER’S ADVOCATE
Chris Gray is the CEO of Your Empire and host of host of Your Property Empire on Sky News. He believes there are simple questions buyers can ask before getting bogged down in the detail of too many Saturday morning house inspections.
1. Am I getting into a volatile market where prices are going to fluctuate, or a low risk family area where people buy houses and hold them for 10 or 20 years?
Whether you’re buying as a home or an investment you need to decide what kind of a market you’re getting into. If you’re buying in those median priced areas around families, people don’t suddenly sell up their homes when interest rates go up or unemployment goes up. Generally, those are stable areas where disaster is unlikely to happen.
2. Am I buying the type of property that’s traded pretty quickly?
Speak to the real estate agents to ask if this is a typical property for the area and how quickly you could or rent it out if you need to.
I try to get people to ask the local agents questions like: “I’m looking to buy a two-bedroom unit (in wherever) are there many around?” Ideally the answer you want is “there are hardly any around, they’re like gold dust”. Then you ring a few more agents and ask: “I’ve got a two-bedroom apartment in this suburb how quickly could you sell it?” You want them saying “yes I can sell it straight away”. And you could talk to the property managers as well and ask them “I want to rent a two-bedroom unit, how easy is it going to be? “Oh it’s going to be really hard because there’s none around.”
3. Am I paying too much?
If you’re going to be living there for less than five years, you really are speculating, but if your property is going to be worth double in, say, 10, 15 or 20 years time, then ask yourself “Am I going to be concerned over losing this property over $5000 or $10,000?” If a market is moving at 5 or 10 per cent a year, then the property value might be moving $5000 or $10,000 a month in some suburbs so you need to think about how long will it take you to find the next property. And how much will values have gone up by then?
For example, I had an investor who really wanted to hang out for an apartment with two bedrooms and two bathrooms, versus two bedrooms and only one bathroom. He thought it was going to be more appealing and get more capital growth. But the moral of the story is that after a year and he still didn’t make a decision and in that time the prices rose by $100,000. So even if he had bought a second bathroom, it was never going to add $100,000 to the value of the property.
Time is of the essence, but how fast is too fast to take a huge financial leap? Source:News Limited
THE SELLING AGENT
Christopher Mourd is the head of network for real estate agency group LJ Hooker. He sees protasticating for too long will cost you money.
Am I taking a long-term view of property?
First home buyers should have a long-term view of property. When they are looking to purchase their first home, the quicker they can get on the property ladder the better, as on average Australian property experiences a 5 to 10 per cent price growth annually. Sydney and Melbourne have experienced far above that over the last few years. Property is also appreciating at a far higher rate than banks are returning interest!
How have properties performed in the area I’m looking in?
Also ask what kind of future development is due for the area. For example, if you’ve purchased in a new land estate, then find out if there will be any more land releases. Your property will appreciate faster if no more land is available because of the supply and demand factor.
Can I afford to buy this property in this location?
As a new buyer the most important consideration should be affordability. If you can’t afford an area, look at going elsewhere. Capital gains, long term growth, days on market etc. are all secondary to whether or not the property is affordable, especially for a first homebuyer. The selling price is the key number here; young buyers should be looking to find something that gets them on the property ladder and fast!
You won’t be able to bid until you’ve been approved so how’s your financial behaviour? Source:News Corp Australia
Jessica Darnborough, spokeswoman for Mortgage Choice says with interest rates at 60-year lows, there has “never been a better time to be a homeowner.”
And while most first-time househunters say a hefty deposit is the killer, Darnborough says not all lenders need a 20 per cent lump sum. In fact a deposit anywhere between 5 per cent and 10 per cent could be enough.
Are my financials in order?
Before you start seriously looking at properties, it’s worth getting your finances in order. Ask yourself whether or not you have a good credit history and if you’ve been sensible with your finances in the past. The better your financial behaviour has been, the easier it will be to get a loan. A mortgage broker or lender will be able to help you source home loan pre-approval, which will give you a good idea of what you can afford.
Do I know what the home loan process involves?
This will give you a good understanding of not only what is required from you throughout the journey, but also how long the whole process may take. Many first home buyers may not realise it, but the home loan process can take several weeks. So knowing exactly how long things will take can help to alleviate any stress down the line.
What kind of loan is right for me?
Taking on a mortgage is one of the biggest financial commitments you can make, so it’s important to get it right. A good lender or broker should ask you what your wants and needs are, as well as any future plans. Then they can help you find a home loan that meets your unique criteria. Once you’ve decided on a home loan product, it’s important you understand the “ins and outs” of it, so make sure you also ask: Am I able to make additional repayments at no extra cost? Does my loan have an offset account? Can I switch from a variable to a fixed interest rate and vice versa?’
Source: news.com.au 3rd October 2015