Although the dream of owning a home may seem increasingly more challenging, a strong majority of Australians still feel that buying their first home is a goal and major milestone in their life plan. Aussies love bricks and mortar.
This makes sense to me- home ownership is a key factor in many individuals’ long-term financial strategies– it plays an important role in improving the health of the economy, and it’s an investment option which people understand and use daily.
But if there is one thing I know to be true, it is that there is no such thing as being over prepared for buying your first property. The trouble with buying a home is that everyone seems to have an opinion- whether warranted or not, so it’s important to ask the right questions. If you’re in the market, here are five commonly asked questions that you too should be asking.
Q: How much deposit do you need?
Normally, buyers need 5% minimum– it’s important to note that you often need to prove that this has come from genuine savings rather than a gift. To a lender, this is a reflection that you can budget your money.
If you have less than 20% deposit you will probably have to pay Lenders Mortgage Insurance (“LMI”). Although, in my experience, even if I had a 20% deposit, I would consider only putting down 5-10%, adding the LMI premium to my mortgage and then put the remaining 5-15% into the offset account which can then be used for emergencies.
Q: When is it the right time for first home buyers get into property investing?
Quite simply- as soon as you can. Yes, the market is unpredictable, and yes- everyone has different ideas on when the right time is to buy. But it’s always going to be a challenge for buyers- especially uneducated first home buyers, so it’s best to just get in. Do this when you can afford to buy, and when you can afford to hold on for the short to medium term.
For next home buyers, paying off a home doesn’t make your property grow any faster and only saves a few hundred or thousand dollars in interest. However, buying an additional property can make you tens or hundreds of thousands of dollars and that extra equity could always be used to pay off your home mortgage.
Q: What are your tips for buying a property that is up for auction?
Know how much the property you’re bidding on is worth – you should know 5 similar properties that have sold for just less and 5 that have sold for slightly more to prove your number.
You can easily keep up to date with the latest sold properties in the suburbs you’re looking at by signing up for realestateVIEW.com.au auction alerts.
Go to 5-10 auctions beforehand to understand the process so that you don’t get blinded by the experience and you understand how much heat is in the market. There are 2 strategies bidders tend to go with which depends on the market conditions and how much you want the property:
- Go in hard from the start, wear a power suit, look the money and bid confidently all the way up to your limit
- Hold back and don’t add fuel to the fire. Hold on right to the end and when they get down to $1k increments put in a knock out of $5k, $10k or even $20k – making sure it’s still within your budget
It can be easy to get swept up in the emotion of the event, so try to take on pressure to go with what the auctioneer suggests. By standing firm, taking your time and breaking up the pace of the auction, it can demonstrate control and confidence to other bidders.
Q: What signifiers should first home buyers be looking for in a suburb?
This is a question often asked regarding “up and coming” suburbs– something that may be of interest to first home buyers who want to get ahead of the trend and purchase before the crowd. Look for lack of supply of property and a massive demand from renters (even though you may be moving into it). To be buying a property that appeals to 80% of the local buyers and renters can help ensure there’s always a strong market for it.
From a lifestyle perspective, choosing a suburb that is close to work, leisure, transport, cafes, restaurants is always important. From an economic perspective, take a look at what industries are located in the area that support the local economy. Having multiple industries supporting the local work force is a strong signifier, so one change in an industry or the economy shouldn’t crash the property market.
Q: How do you know whether a vendor is genuine about selling at the recommended price?
Firstly- you’ve got to ascertain the motivations of the vendor. Why do they want to sell? Ask the agent– ask them multiple times and in different ways to make sure it’s consistent i.e.
- Would they like a shorter/longer settlement?
- Would they like to rent the property afterwards?
- Would they sell the furniture too?
Confirm with the agent when they will expect to exchange contracts if you did bring him a signed contract and 10% deposit at a certain time for the agreed value
Try and build a positive relationship with the agent where he sees he can get further transactions from you i.e you will give him property management business if you rent it out. Or, if you are buying with the intention of flipping it as an investment, you will get him to sell the property for you after you have renovated it.
What questions do you have or advice do you need about buying property? Join the #firsthomerealadvice conversation on the 17th November from 5-7pm! I will be on the ExpertVIEW blog to anwser your questions.
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