Use this home buyer’s checklist

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People who have bought and sold several times have mostly learnt along the way what to look for when buying a property. But for first-time buyers, both owner occupier and investor, getting caught up in the excitement of buying a property often leaves buyers in an emotional state. However at this stage of the process, they need to have a good balance with their rational side.

Let’s start with first timers. In my early years, first home buyers played an important part of my career and there were some fundamental requirements that were often overlooked. To top this off, there was always a family member ready to offer free advice! Why mention this? In many cases a family member does not want the responsibility should something go wrong with a purchase and will often point out everything that’s wrong with a property which leads to confusion and a delay in purchasing. This is dangerous advice in a rising market.

TIP 1. SEEK ADVICE FROM A PROPERTY ADVISOR WHO’S NOT EMOTIONALLY ATTACHED

One of the biggest mistakes buyers make is in buying what they want rather than what they can afford. Interest rates may be the lowest they have ever been, however, if rates were at 10% and went up to 12% this could be seen as a modest increase of 20% in repayments however if the rates are at 2% and go up to 4%, this would be a 100% increase, and this could destroy many unprepared over mortgaged first timers.

TIP 2: PLAN FOR AN INCREASE IN INTEREST RATES AND BUY WHERE YOU CAN PRACTICALLY AFFORD EVEN IF IT’S NOT WHAT YOU WANT – WHAT YOU WANT WILL BECOME AFFORDABLE IN TIME

Yes, a first-time buyer, and in fact most buyers, need to ensure they obtain the correct reports (building and pest) and along with this there are a great many number of organizations offering free property appraisals that are a must. Research is critical and lack thereof could be financially disastrous. Fear of missing out (FOMO) often pushes people to rush a purchase and in doing so suffer the consequences later. Right now, properties advertised for sale are the lowest they’ve been for years and demand is much higher than supply. A great many number of people will pay more for a home today because of FOMO. If they intend to stay in the property for a long time, then paying more will not have a great deal of impact over time, however, repairs and maintenance issues often overlooked in the rush, could come home to roost and be awfully expensive in the process.

TIP 3: MISSING OUT CAN OFTEN BE A BLESSING SO MAKE CALCULATED DECISIONS WHEN POSSIBLE

For buyers looking to invest in property, be careful not to be sold on the concept of rental return. You need to have a careful balance of rental return and capital growth. The number of times I have heard people say ‘the property pays for itself’ often concerns me as this generally means they have favoured rental income over potential capital growth and to move onto a second investment property, capital growth is critical. This means buying in areas often more expensive, but well located near essential services.

TIP 4: RENTAL RETURN DOES NOT GUARANTEE A GOOD PROPERTY PURCHASE HAS OCCURRED

When purchasing an investment property, you need to ensure that, for the best opportunity for growth, you are not purchasing within an already strong rental street, unit block or suburb. The less competition you have, the better and the more the area has a pride of ownership, the greater the opportunity for growth.

TIP 5: BUY WHERE COMPETITON IS THIN AND OWNER OCCUPIER PERCENTAGES ARE HIGH

These points are but a few important items to know when it comes to such a large investment but access to knowledge today around property purchase is very accessible and so many mistakes of the past can be avoided with just a little research. Take your time, do your homework, and make sure you can afford to repay any loan after factoring in a reasonable increase in interest rates.

 

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.

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