Steps to Buying Your First Home or Investment Property
Buying your first home, whether it is a place to live or an investment can be very daunting. Think about it, this is probably going to be your single biggest asset and also the most expensive so you are going to need to pay a lot of attention to the steps required to get your property.
It is easy to become overwhelmed with the task of buying your first home but do not despair. With the right advice and guidance, buying your first home or first investment property can be an easy and dare I say it enjoyable experience!
Step 1: The Numbers
OK, I purposefully started with the boring stuff first. It may seem boring but can also be the most critical.
What are the numbers you need to be aware of? They are your deposit, stamp duty, settlement costs, your borrowing capacity and your affordability – how much can you AFFORD to repay rather than how much the Banks are willing to LEND you.
Getting the numbers right is your critical first step and I believe you should engage your mortgage broker at this stage to help guide you through all of these items so you are well prepared and aware of your budget and borrowing capacity.
Step 2: Research
Where do you want to buy and what price? This is most likely going to be dictated by what you find out by going through Step 1. You may realise that you cannot afford the suburb you first looked into and possibly it might be a wiser move to buy in a lower priced area until you build up more cash or equity to use a future deposit.
You should get to know the local area and what is selling. Attend as many open homes as you can, keep an eye on the auction results each week and get a true sense of what price properties will sell for. Unfortunately real estate agents are not your best source for ‘price guides’ so do your research and get a firm understanding for your own knowledge.
Remember, the first property you buy doesn’t necessarily mean it will be your last. I would much rather get something I can afford and am comfortable living in instead of overpaying and struggling to pay my mortgage with something more expensive or in a newer area.
Step 3: Negotiate
Once you find the place you like it is time to go and negotiate and secure it. Properties will normally sell under Private Treaty (negotiation between the buyer and seller via the real estate agent) or Auction. Auction is where you and other interested parties will bid on the property on the sale day. The highest bidder wins and the vendor will set a reserve price at the minimum level they are willing to accept.
If the auction bidding does not result in a price above the vendor’s reserve, the property will be ‘passed in’ and then the highest bidder has the first right to negotiate directly with the vendor.
Step 4: Secure
Congratulations! You have won the auction or successfully negotiate a purchase via private treaty. It is now time to get your deposit in order and prepare for settlement.
Before negotiating a property purchase you should have engaged a solicitor or conveyancer to act on your behalf. It is this legal representative who will now be involved in finalising the settlement and transfer of the property into your name. Your lender, broker and conveyancer all have responsibilities in the lead up to settlement to ensure this happens without delays or other issues.
Step 5: Enjoy
Settlement is completed and you can now begin to enjoy living in the new home or, start receiving your rental income and now call yourself a landlord!
Buying a property is a daunting experience for many. With the right advice and preparation you will be on your way to property ownership and then you can start making plans for your second acquisition.