Like you, we know that Australians are in love with property. Go to any BBQ in any capital city or regional town and the main topics of conversation will be property prices and renovating. Our preoccupation with property has spilled into magazines, online blogs and even television with countless shows focused on buying, selling and renovating properties.
With so much interest and pressure on people to climb the property ladder, it’s no wonder many feel confused.
On show are big homes, home theatre rooms and jacuzzis, ensuites and walk-in robes, double garages and so on: all adding to our misconceptions about what people have in their homes. These property misconceptions are holding us back from making the right choices about buying property.
To help you cut through all the property noise and make decisions that are right for you, we’ve provided some ideas and answers to help you eliminate the top property misconceptions:
The classic battle between need and want.
For your first family home, do you really need 4 bedrooms, 2 bathrooms, a double garage, a walk-in robe, a designer kitchen and great outside space for entertaining? And secondly, can you afford this lifestyle? Ask yourself if you can realistically afford this dream and does this house suit your current needs?
‘Can you afford the dream?’
For your first home, it is far better to be realistic about your actual lifestyle and your budget. I know that every middle-aged person says that, and that every young first home buyer thinks it’s the most boring advice ever, but it’s true.
Nothing ruins your financial future quicker than overextending on a property and then later having to sell at a loss or having the bank foreclose. Keep the dream alive but move towards it. Trade up to your dream home over the next 10 to 15 years, based on your savings and the equity you have grown because you purchased wisely in the beginning.
So, what does a sensible ‘First Home’ look like? Analyse what you really need right now. Do you really need a media room and walk-in pantry? Are you better off in a smaller property close to services, rather than a stand-alone home in the outer suburbs? Should you consider getting a flatmate to help pay down your mortgage quicker? And, finally, if you are considering starting a family, make sure you can afford the mortgage with a possible reduction in income.
Keeping up with the Kardashians.
I don’t watch the show, but I know enough to know it’s not realistic. This preoccupation with money and displays of wealth is making it difficult for many to get onto the property ladder.
The average amount of debt per Australian has quadrupled since 1988. On average, we’re now all carrying $245,000 each in debt. Sure, a lot of this debt is housing related, but a significant amount results from credit card debt for fashion that is already dated when it leaves the store, flashy cars that lose their value as they leave the car yard and overseas holidays that we will be paying off for many years to come.
Keeping up with the Kardashians, or Jones’ as we like to say in Australia, can stop you from saving for a house deposit, or it can push you into a home that you simply can’t afford. Take stock of what you really need and make decisions based on what’s best for you, rather than what you think others expect. Chances are, the person you are comparing yourself with, can’t afford it all either.
Unit versus stand-alone home OR space versus amenity
There are pros and cons to both units and houses. They don’t suit everyone, yet everyone will have an opinion on what’s best for you.
Units can provide a cheaper entry point into the market but may be slower to sell later. Larger established homes may offer more space but be located far from transport, employment and lifestyle options like restaurants and cafes.
Be honest with yourself about your budget and your lifestyle. Will you enjoy your life better being close to amenities or do you long for a front yard and a driveway?
‘Prioritise your wish list ‘
Work out what is vital for you and what you can afford and then get busy researching areas, styles of property and market trends.
Why buy old when you can have new?!
Sure, new homes have some wonderful benefits. For a start, you can often reduce the amount of stamp duty required to pay to the government by buying a new home. New homes are easy to manage, maintain and may have technology and materials that make them cheaper to cool and heat.
With all these mod cons from double garages to ensuites, they are certainly enticing, but do consider that they can cost up to 20% more than an older, smaller home in an adjoining suburb.
Buying an older home could deliver big savings in the long run. Older homes are often on larger blocks of land, they have character and charm and can be better located to schools, shops and transport. Older homes also offer scope to renovate to realise gains in value.
And finally, whether you buy old or contemporary, get a property inspection so you don’t buy someone else’s mistakes or problems.
Of course I can renovate!
Australians are in love with our ‘reno shows,’ which on the surface make it look easy, but is this a skill that you have? If you or family members or friends possess these skills, then consider buying a renovator and get busy putting your stamp on it. But if you don’t, then be realistic about the costs and time renovating takes.
Buying a home that you can add value to, rather than paying the bigger price tag for someone else’s work, can be a huge financial windfall. However, you need to do your research as our preoccupation with renovating has meant that people are often paying more for the run-down fixer upper than the finished property next door.
Your heart is set on a view or a suburb
In the battle between price and location, there can only be one winner. You can choose the great view or the fancy suburb with the massive price tag or the smaller home with the modest price tag and no view. It’s a choice only you can make.
Consider whether the view or area is worth the additional sacrifices it will take to pay for it, or whether you are better off waiting till your second or third house to secure your ‘dream home’ and view.
Is the suburb on the up and up?
Read all you can about which areas are hot and those that are not and why. If you can identify a location, or even a sub-area within a suburb which is starting to experience buying appeal, then consider this as a good location to buy in.
Look for ‘wealth building possibilities.’
If you can buy on the upswing, you may secure yourself a home with lots of potential , aka ‘wealth building possibilities.’ The neighbourhood may be undervalued now, but if you successfully work out the potential correctly, you may find that in a couple of years, you are enjoying that latte in the middle of a hot new trendy suburb, with a home that is worth a lot more than you had dreamed.
Don’t judge a book by its cover
Several years ago, I was helping a friend with their property search. I checked out several properties for them, including a few that I didn’t even get out of the car to inspect. No kerb appeal, very plain, just not right. Yet I couldn’t have been more wrong about one in particular. Behind a very ’40s facade were gorgeous art deco features and extra-large rooms, all waiting for a great makeover.
This experience taught me that you can’t judge a book by its cover. Spend the 5 minutes to inspect the plain looking house in your target area. You just don’t know what may be hidden behind a dated facade and piles of rubbish.
‘Life is like a box of chocolates, you never know what you’re going to get’
Keep a record of all the homes you visit, their prices, their advantages and disadvantages. Review and update this regularly when a home is sold. This way, you will really understand the property market and the price points. There is even an app to assist with your records.
So now you know how to cut through some of the crazy misconceptions about property buying. It’s time for you to get out there and buy your first property.
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