When investing in residential property, contrary to what many experts want you to believe, the formula for success is not that complex. Many get their first break from nothing more than right time, right place.
Here are some principals to follow.
- Before you buy the property, undertake your own research on areas and the market conditions of those localities get to know the place!
- Select a property and have the property title investigated (a job for you and your solicitor — including research on flood zones, bush fire risk, drainage, and easements)
- Inspect yourself and use the professionals to investigate construction/condition of the building, ensuring the immediate locality doesn’t have any nasty surprises that google maps failed to reveal.
- Always inspect personally, or have someone you trust to do this. Otherwise, your hard-earned dollars are at risk
- Be well informed so that the price you pay is not over market value. Property investing is only about what you pay and what you sell for and ensuring you can afford to hold the property if the market falters and that you’ll have to wait for a decent capital return.
That wait can take many, many years in some market cycles, even in our big cities.
Frequently Asked Questions
How much money will I need?
At a minimum, you will need a 10% deposit plus enough funds to cover legal fees, a building inspection, and stamp duty. If you buy a property with a deposit of less than 20% of the purchase price, most lenders will require you to take out mortgage insurance as well.
Is it better to save up more or buy now?
If interest rates are low and the market is rising, the growth in property prices will usually outstrip your ability to save. That means it’s often better to purchase your home as soon as you can afford it.
I like the suburb but I don’t know it that well?
The best way to get know an area is to research it online, then go and see it in person. Start by searching for properties you like and then go to the open inspections. Talk to the agents about the area and on the way there and back; keep your eyes open for traffic issues, construction sites, transport, shopping centres, parks, and schools.
Once you have visited around a dozen properties, you’ll start to get a good feel for where the best locations are.
I’m not really sure what this property will sell for?
The best way to estimate what a property is likely to sell for is the recent sale prices of similar properties. Click on the Sold function on RealEstate.com.au and search for recent sales with the same features and location as the property you are interested in.
Should I get a building inspection? And Why?
If you are a qualified builder, engineer or architect then you are more than qualified to assess a property for faults. If you’re not, then a building inspection is a necessity.
This is because properties which look fine may have structural faults, problems with the electrical wiring or plumbing, termite infestation or a number of other issues which can be expensive to fix – very, very expensive.
5 house buying tips you need to know
After months and months of searching, you have finally found the property you have been dreaming of. Don’t miss the sale by making a beginner’s error.
1. Get good legal advice
The importance of getting solid legal advice when buying property cannot be overstated. A good conveyancer or solicitor can alert you to serious problems with the property that could cause the sale to fall through, including:
- Illegal building additions or renovations which could be removed by council or costly to update
- Complications with the existing title deeds and legal ownership of the property
- Potential issues with strata management clauses and fees
- State authority rights to the property pertaining to zoning and/or future developments to the area that could seriously affect the property’s value.
Your legal representative will also review the contract of sale and mortgage agreement to ensure these legally binding documents protect your interests.
2. Make your property inspections count
If you are serious about a property for sale, you will need to organize a professional building inspection to check for structural defects, pest infestations, damp, asbestos and issues with the plumbing or wiring. But before you get to this
stage, you will undertake your own property inspection. And while your emotional response to the home is important, you need to think carefully about its potential problems. There are key ways to spot a lemon, such as:
- Search high and low for damp and mold. Look out for fresh patches of paint that could be hiding the problem and check skirting boards and ceilings.
- Look for structural issues like sagging ceilings, uneven door or window frames and buckling in walls.
- Test all the taps and see how long it takes for the hot water to come through, and check out the hot water heater.
- Ask yourself: is this an energy efficient home? We all know how costly bills can be.
- Don’t underestimate council rates and strata fees. Find out what these are before you proceed.
3. Learn from the mortgage market
Knowing your borrowing power is essential before making a bid or offer on a property. By talking to different lenders, reviewing interest rates and investigating potential product add-ons (such as redraw facilities, offset accounts and repayment holidays) you can determine how much you can realistically borrow. Always consider your ongoing homeowner costs and ability to manage mortgage repayments in the future. Obtaining loan pre-approval will keep you ahead of the buying pack. There are useful online calculators that can help you estimate mortgage repayments, compare loans, and evaluate your overall buying power.
4. Get an accurate valuation
Sales have been known to fall through due to an inaccurate property valuation. This becomes a particularly precarious situation if you have committed to a purchase at auction, or signed an unconditional contract, and your chosen lender values the property at a lower price than what you paid. It could mean having to borrow more than you budgeted for. Always use an accredited valuer if sourcing your own valuation.
5. Consider a buyer agent
Buying real estate can be a game of negotiation and bravado. If you’re not comfortable making sale offers, bidding at auction, or negotiating settlement terms, it could be a good idea to hire a buyer agent. Along with finding property, buyer agents are experts at evaluating properties for sale and negotiating purchase terms. An alternative is to use a trusted friend or family member.