Before I bought my first property, I was a bit scared of the challenge, I considered myself quite inexperienced. You can check how I got over the fear of buying property in my previous post. However, this time I wanted to share what I learned from this experience so you can be more prepared when you buy your first property.
Here are some helpful tips on buying your first property:
- Do your research.
If you are interested in a particular neighbourhood, do your research on the neighbourhood, who lives there? Are the neighbours nice? Is it close to schools, community centres, shopping villages or malls, transport and parks etc.?
The amenities that surround the property are not only important to your standard of living but also to the people who may be your tenants, if you decide to buy the property for investment purposes.
- Arrange your finances and get a loan pre-approval before you go shopping for homes.
Going to inspections without a pre-approval is like going to the shopping mall without your wallet. Unless you are window shopping, you are not doing yourself any favours because you may have an impulse to make a rush decision before sorting out your finances.
I have had clients who have made offers on apartments before even getting a pre-approval. Luckily, the offers were knocked back and they still needed a couple of things before they could be eligible to borrow the sum of money they wanted. Some didn’t even know how cooling-off periods worked or that they could lose the deposit if they backed out after exchanging contracts at an auction (auctions in NSW do not have a cooling-off period).
The following page has some information on how cooling-off periods works in NSW: http://www.fairtrading.nsw.gov.au/ftw/Property_agents_and_managers/Agency_responsibilities/Agency_agreements/Cooling_off_period.page
If you want to know more about how auctions work, here is a good article you can read: http://sellingguide.realestate.com.au/presentation/on-auction-day/
You may find the number of lenders and loan products in the market a bit overwhelming, so unless you have a few spare days to really get into it and do your research on the loan products offered, features, and lender approval policies, I highly recommend that you speak to a home loan specialist or a mortgage broker. You can speak to us for help, or your local broker, the choice is yours. A mortgage broker will do all the legwork for you, they will research lenders, approval policies and assess your individual financial situation to ensure you do not enter into an unsuitable contract and if suitable, lodge the application for you. For more details on what a mortgage broker does, please refer to our Q&A page.
- Ask lots of questions, don’t be shy
When you are visiting a property, ask as many questions as you can think off, after all, this could potentially be your property for years to come. This article has 101 ideas on the questions to ask: http://www.yourinvestmentpropertymag.com.au/buying-property/101-questions-you-must-ask-before-buying-that-investment-182819.aspx
- Don’t believe everything the sales person tells you
Even though you will ask the sales person many questions, don’t expect them to tell you the truth about everything, after all, they are there to sell you a house, not to make a friend. When we bought our first property, we asked how much it would rent for. When we rented it out we got $70 per week less than what the sales person stipulated, so it is important to do your own research about the area and search for comparable listings online to see that the sales person is telling the truth.
- Don’t exchange contracts or pay the deposit unless you have been approved.
Loan approvals can take as little as 2 working days or as long as it takes to get the required documents to the bank plus the time the bank takes to review these documents. Lodging an application does not mean that you can exchange contracts. It is important to be patient, you want to make sure your loan has been approved before you risk your own funds.
- Get a building and pest inspection
A broker friend of mine had a customer who bought a property, and who found out during the building inspection that one of the corners of the house was being held straight by a jackhammer. Fortunately, they were able to negotiate a lower price due to this finding to make repairs to the property. If he had not done that inspection, he would have been down thousands of dollars.
In my case the inspection results were pretty good and I am glad I did it for my own peace of mind.
- Research for good property managers if you are renting the place out. Don’t just stick to the ones that sold you the property.
We made the mistake of just giving the listing back to the same real estate agency that sold us the property without checking if they were a good agency first. This costed us almost 3 months of vacancy on the place. Granted, the property was in a tiny town and they told us that there was no demand for it so we believed them. However, after a while and a few red flags were uncovered, we decided to change property managers and rented the property out within a couple of weeks. This shows how important it is to have a good property manager. We are still with them and are really happy with their work.
- Get a conveyancer/lawyer to do the legal work for you
This is an obvious one and one that most people do. I just wanted to mention it because I have had customers who were not aware of this. Get a lawyer to check the legal side of the property purchase and to explain the contract to you, it saves you a lot of headaches and uncertainty when making your purchase.
I hope this helps you in your future home purchase. Best of luck.
With a grateful heart,