Given the health and economic crises we have been facing in 2020, many first homebuyers are understandably nervous. Is now a good time to get a foot on the property ladder or would it be better to wait until things settle? According to the experts, now is as good a time as any. The key is to be smart about it.
Here are 8 tips to consider before signing on the dotted line.
There is a good financial incentive for making your first property purchase an investment property rather than your home – all eligible costs become a tax deduction making it up to 40% cheaper than buying your own home. Rentvesting also allows you to live where you prefer to live but can’t afford to buy.
- Consider a unit
Too many young people expect to be able to own the house and garden that took their parents decades to be able to afford. Instead, consider buying a unit, not a high-rise off-the-plan apartment but an established unit in a great neighbourhood close to public transport and amenities. Units like this not only have more character and charm, but they also have far great capital growth potential than apartments in a multi-residential complex. And there are some amazing buys at the moment, like 20/11-15 St Leonards Street, Mosman Park, which has been reduced to just $395,000.
- Consider a loan from mum & dad
Many young Australians are getting a helping hand from their parents, many of whom have benefitted from significant increases in the value of their family homes, giving them plenty of equity to borrow against to help their children. In fact loans from ‘the bank of Mum and Dad’ is on the rise with more than 55% of first homebuyers requiring financial assistance from their parents these days.
- Know the costs involved
There are more costs involved in buying a home than the purchase price alone. There’s stamp duty, conveyancing and moving costs. And then there are the other expenses that renters don’t have to fork out like insurances, repairs and maintenance and council rates or strata fees. All of these costs need to be budgeted for. Consider the incentives on offer too, like stamp duty concessions. Do your research.
Fear of missing out (FOMO) causes inexperienced buyers to rush in and potentially make mistakes. Paying too much for a property is one of the biggest mistakes that first homebuyers make because they are so excited about the opportunity of becoming a homeowner they’re thinking with their hearts, and not with their heads.
- Adopt a long-term strategy
Property is a long-term investment strategy. If you need your money back within 5 years, you’re not ready to buy. In most markets you should be prepared to own your first property for at least 5 years in order to make a decent enough return on your investment to upgrade.
You can’t expect to set yourself up for financial success if you don’t put the time and effort into increasing your knowledge about the property market. Spend half an hour or so a day reading articles on finance and listening to blogs from reputable property experts.
- Be guided by the experts
Don’t be afraid to ask for help. In fact it is smart to do so. Look for a real estate agent who operates in the area in which you are looking to buy – someone you can trust (word of mouth is the best way to find a great agent). And see a mortgage broker for help finding the best mortgage to suit your needs. At Shelmark we have helped many first homebuyers find and secure their first property. Contact us for an obligation free chat.