Excitement, pleasure, pride. These are the feelings that buying a property can bring, whether it is your first home, your next home or an investment property.
Choosing the right property for you comes down to knowing what you need, knowing what you can afford and knowing exactly what’s available at the time you are ready to buy. It means the property you finally buy is like the one you had in mind when you started out – or as close as possible.
Before starting out as a buyer there are two important points to understand:
• It is up to you and your legal advisers to examine the property and the sale contract and make a decision.
• Ray White Box Hill is engaged by and therefore work for their clients, the sellers, to get the best price possible for their properties and to sell them as quickly as possible. However, whilst owners are their clients, buyers are their customers and it is the agent’s business to match them up. This means finding you the ideal property in the price range you can afford. You should therefore do some research on your own into what you want and what you can afford.
• Get good legal advice, set an upper financial limit and keep your head. If you do all this, buying property will be an exciting experience.
Knowing what you need:
Although it is obvious, it is sometimes overlooked. The type of property you buy should reflect the purpose of the purchase and the lifestyle you are planning for your future.
Will you be living in or renting out the property?
If moving in, consider the following:
• Household numbers and whether they will change
• The needs of each person in the household now and in several years time
• The sort of local amenities required and how close they should be
• The sorts of work and leisure activities that you engage in
• The length of time you expect to live in the home
• The features you want in the home, in order of importance.
Think about these questions and discuss them with anyone else who should be involved. Priorities are important because you may need to compromise on some points. Jotting down the answers will produce a check list of your real future needs, which can become your guide to the sort of property you buy and where you buy it.
Knowing what you can afford:
Assuming that you are going to need one, the size of your home loan will normally depend on answers to the following questions:
• Your income or incomes
• Any other commitments such as credit cards, hire purchase and personal loans
• How long it will take you to repay the loan (the term of the loan), and
• The interest rate being charged over the term of the loan.
Two other important factors are:
• Whether you have enough money saved or available to pay a deposit on a home • Whether there will be enough money left over to pay for all your normal daily living expenses.
The larger the deposit you can put down on your home, the easier it will be to buy it. In any case, it will generally have to be between 5% and 10% of the purchase price depending on your borrowing capacity and the policy of the lending organisation.
Don’t forget to budget for the other costs of buying a home:
• Legal expenses
• Lender’s fees
• Any government charges – eg. stamp duty
• Any inspection costs (eg. building and pest inspections)
• Moving costs
• Utilities – ie the connection of gas, phone, water, etc.
When all the calculations are done, you will know what you can afford. It is important not to getovercommitted and, recognising this, lending organisations generally cap their loans so that the repayments are around 30% of your gross monthly income.
You will find a lot of variations in loans available and it is in your interest to be aware of the loan that suits you best. Make and appointment with a broker from Loan Market. They have access to a large number of financial institutions. Loan Market can save you time and money by finding the most suitable home loan package on offer at no charge to you.
Once you have found the right loan to suit your needs, get it pre-approved or pre-qualified. In either case, you will be showing that you have access to finance, which is a big advantage because:
• You can show real interest quickly in a property that you want
• It will give you an edge over other buyers for a quicker and more definite settlement
• You will be able to make offers and bid at auctions with confidence, maybe just that bit faster than someone else who wants the same property as you do.
Legal advice and representation:
The legal aspects of purchasing a home vary across the country and you should investigate your specific requirements in your area. In some areas a contract of sale and the certificates that accompany it must be provided by the seller and set out the details about the property you will buy. In other areas where when buying by private treaty a standard Real Estate Institution Contract will be drawn up by the agent and the buyer will sign with the first offer.
The amount of information a seller is required to give you about their property and any relevant matters also varies from state to state so some important information may need to be requested by you.
Investing in property
The appeal of real estate as a long term investment will always exist. Investment in property is also a way of diversifying an investment portfolio.
Before investing, you should be satisfied that:
• The property chosen will remain attractive to potential tenants in the long term
• The property will provide good capital gains over time which are not unreasonably reduced by the need to carry out extensive renovations or the approval of adjacent developments such as freeways and railway construction. For small investors looking to enter the real estate market, access to finance structures around a fixed rate can be attractive.
As an investor, you can plan with confidence, matching your loan and management costs against rental income. You can also benefit from negative gearing which helps reduce your tax.
Negative gearing allows a deduction for certain costs where the property income does not meet all the associated expenses such as interest charges, rates, maintenance, insurance and advertising. It is our recommendation that prior to investing in property you seek your own independent financial advice.