JANUARY 12, 2019

Property experts give their tips for buying your first home

No matter how young or old you are, buying your first home is a huge step, and it usually comes after many years of planning, researching and saving.

While interest rates remain at a record low, the property market in Australia also remains strong, and particularly in some capital cities, it can feel like an impossible task for many buyers to take that leap into buying their first home.

We may romanticise the idea of what it was like to buy a house 30 years ago or more, when everyone was seemingly just picking houses up off the pavement with no second thought. But that isn’t quite the reality of how things were. Whether it’s now or back then, buying your first home has always meant considerable sacrifice, patience, fortitude and organisational skills, regardless of the state of the market.

We asked a number of experts, who have been in the property game long enough to know what works and what doesn’t, about what they wish they had known when they were buying their first home, and the advice they would give to Australians buying their first home.

Building wealth through property

Rob Flux has a great story for budding property owners trying to crack the market, even if it feels like an impossible task. He had to start from scratch twice in the accumulation of wealth through property. Now retired from property investing, he runs the Developer Network, a community of over 4,000 Australians, in which he provides insights into the use of property as a means for wealth management and accumulation.

“I purchased my first property at the age of 18, and my first investment property at the age of 21,” says Rob. 

“I bought my first home off my parents while I was living in Darwin, while my investment property was on-sold within 18 months for approximately 40 per cent growth on the initial purchase. I purchased these just prior to ‘the recession that we had to have’, where I was paying interest rates in excess of 18 per cent.”

At 38, Rob faced financial stresses that almost effectively brought him back to the start again, forcing him to evaluate how he could use property to his advantage and do so in a way that was active, rather than passive.

“I’ve now learned how to manufacture growth, rather than rely on the market, picking areas with better capital growth capabilities and finding ways to control property rather than own it, using this control to force value onto the property prior to purchase,” Rob says.

“I wish I had known the implications of negative gearing and its limits in enabling me to scale my investment portfolio quickly as well as compounding growth and why you want to keep as many properties as you possibly can. It’s important to understand ‘growth corridors’ and how they can massively increase the chances of capital growth.”

Getting on top of your finances

While it’s easy to get caught up in the more romantic side of buying a property, like envisioning your new lifestyle and how you’ll style the property, understanding your finances is the most important aspect. Brendan Dixon, founder of financial services company Pure Finance, is someone to have on your side when looking to purchase your first home. For Brendan, mindset is everything for first home buyers.

“Be realistic about your property expectations, and be prepared to compromise on some little things, otherwise you may never buy anything,” says Brendan. 

Beyond that, he says preparation and organisational know-how is everything. Brendan says you don’t necessarily need to forgo that avo on toast or your favourite takeaway deliveries or morning coffee to afford a home. In fact, if they’re important aspects of your lifestyle, you need to be taking those into consideration and finding a way to afford them alongside your home loan.

“Know your monthly living expenses. Do a budget for everything, including coffee, Netflix, holidays etc. and see how much you have leftover to be used as a loan repayment,” he says. 

“A loan should suit your individual lifestyle rather than your lifestyle having to suit a home loan.” 

Regrets? I have a few

Even once you’ve got your finances sorted and have honed in on what you’re looking for, then there’s always the question of when the right time to buy is. The reality is, there’s never going to be a perfect time. And even when everything goes swimmingly, you may still find yourself with some elements of regret. You may end up asking yourself, could we have gotten the house for cheaper? Did we not push hard enough on our first choice before losing out to a stronger bidder? 

Alan Yeung, a property consultant at Location Property Group, has his own regrets, but has some sage advice for keeping some perspective amid the flurry of buying a house.

“I wish I could have purchased sooner. The earlier you start your search then the earlier you can get a result, but only look within the price range you can afford so you can save a bit of time in your search,” he says.

“My general tip for a first home seeker, especially with high loan to income ratios in Australia is: know that it is the same for the neighbour who is also purchasing today. Whilst the income and loan ratio was lower 15-20 years ago, the interest rate was also much higher. There is nothing to be scared about. Embrace the challenge.”

Thinking about buying your first home and want to know more? Check out some of the hidden costs of buying a home so you don’t get caught out, and check out our post on the pros and cons of rentvesting to be aware of your options when buying a home for the first time.

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