In a previous article posted in September last year, we examined the mistakes to avoid when investing in property. We highlighted the risks associated with investing in property, and we encourage you to read this article.
In this article, we have assumed that you have recognised the risks and are now happy to proceed with your investment journey.
Now that you have decided to invest in property and are ready to take the next step, this article looks at what mistakes to avoid when buying or investing in property.
It is important that you make a sound, informed decision, and while a common phrase of “learning from mistakes” is often used by many, you don’t want to make a mistake that could have significant implications either financially or emotionally.
The mistakes you should prefer not to make include the following:
- Not doing the numbers
It is crucial you know what the costs are when purchasing a property. Make sure you are familiar with all the costs associated with buying a home, and these are inter alia:
- Conveyancing fees
- Deeds office fee
- Transfer Duty
- Bond costs
Tip: Use one of the many cost calculator functions found on any bank or property website to calculate the estimated costs of acquiring a home.
- Forgotten costs
There is a term for costs that are not considered. They are called FORGOTTEN costs and include the following:
- Moving cost
- Insurance
- Rates
- Water & electricity cost
- Levies
- Maintenance costs
Tip: Compile a schedule of estimated costs for the property you are looking at buying.
- Approaching only one bank for a bond
Most first-time home buyers just accept approval from the first bank that approves their loan application, instead of applying to more than one bank.
Given the amount of the loan and its subsequent interest implications, it is very important that you shop around for the best interest rate.
If you have a good credit record, a healthy financial standing and stable employment, a number of banks will likely approve your application. Never assume that your bank you have accounts with will offer you the best interest rate, as this is often not the case.
Spend some time approaching banks with your loan application, as this exercise will save a significant amount of interest and ultimately limit the end cost of your home.
Tip: Use a bond originator such as OOBA or Better Bond, which can assist you with bond applications to various banks.
- Underestimating repair and/or renovation costs
Be careful when viewing a property, so that you don’t look at the property with blinkers on. This is even more difficult to do if you allow your emotions to dictate the overall decision to buy.
Ensure that you have a realistic idea of how much the repairs that may be needed will be.
Cost the renovations that you had pictured, accurately and realistically.
Underestimating costs related to repairs and/or renovations is most often the biggest mistake that first-time home buyers make. The consequences of this mistake can lead to regret and possible financial disaster.
Tip: Ask a friend for their opinion on renovation needs and costs.
- Not using a reputable Estate Agent
Most first home buyers underestimate the advantages of utilising a good estate agent when looking to buy a property. Some feel that they prefer not to be pestered by an estate agent.
It is our opinion that a good estate agent can add so value and make your search so much easier and less stressful. Remember that using an estate agent is not going to cost you anything, as the seller pays the commission.
Looking for a property to buy for the first time should be an exciting experience. Once you have established what you are looking for, reach out to a good estate agent in the area.
They will know the local market, be able to offer houses to view, sometimes before they are even advertised and provide valuable guidance and expertise that is needed to navigate a tricky landscape.
Tip: Before approaching an estate agent, plan and research what price you can afford, the size of house you need, the type of residence you want and the area you prefer to live in. This significantly narrows the criteria for the estate agent to assist you in finding the most suitable home.
- Not doing your homework
In a previous post, we spoke about all the factors that need to be considered when looking for a property to buy.
Buying into the right area, for instance, is crucial for the long-term investment growth of the property.
Be sure to conduct thorough research on the neighbourhood and surrounding areas, applying the factors that we mentioned, such as proximity to schools, shopping centres, and rental demand, to name a few.
Tip: You must take your time in finding the property that best suits your requirements to avoid regrets of making the wrong decision and affecting your resale value.
- Don’t buy more than what you can afford
In some instances, first-time home owners set a budget but then find themselves emotionally attached to a Property that is priced slightly higher than what they have calculated they can afford. This is a dangerous situation, as often the emotion of wanting the house manipulates the reality of exceeding the initial budget.
This can lead to the buyer being overextended and leaving no breathing room for any unexpected expenses or anticipated renovations.
Tip: Establish what market price you can afford, allow a little less to give you some room for negotiation and never exceed the amount you budgeted.
- Don’t limit your search to just one property
As a first-time home buyer, never limit yourself to just looking at one or two properties. Once you have established your criteria and have engaged with a reputable estate agent, look at as many properties as you can that fit your requirements.
This helps in not attaching yourself emotionally to a property, especially if you have placed an offer and are now waiting for a response.
Looking at multiple properties provides you with the opportunity to compare properties while determining the potential of each one. In some instances, you may find two or more properties that are similar and really comes down to price.
Tip: Try to view as many properties that suit your needs as possible, as often seeing it physically provides so much more clarity to make an informed decision.
In conclusion, buying your first property can be exciting, yet daunting at the same time. We believe, however, if you apply the aforementioned tips and do not make the mistakes as mentioned above, you will be happy knowing that you made the right decision in buying the house you chose.
THE END