Buying a home is a long-term commitment that forges a relationship between you and your home loan for 25 to 30 years. So just like any other relationship in life, it’s important to understand how you can make the most of your time together so that it’s enjoyable and rewarding.
While it can be said that there’s a certain amount of pressure on you to perfect your relationship, it’s also important to remember that not everyone gets this relationship right. Even property investment gurus don’t have all of the answers, and sometimes they get it wrong. But, by asking as many questions as possible right from the start, and looking at the data, then you have a better chance of making your relationship last.
According to property investors, you’ll never have all of the answers or knowledge, but you can have a red-hot go at it. Plus, the statistics and data can be overwhelming, and at times, confusing. So rather than getting caught-up in all the information so you can’t decide which way to head, there are several questions that you can ask that will allow you to decide if this home or market is right for you.
The Home Buyer’s Question Guide
There are a number of simple, straightforward questions that a prospective buyer can ask before they start visiting open inspections. These questions are as follows:
1. Is this property market one that will be volatile and fluctuate, or is it low-risk where people buy and hold for 10 to 20 years?
Regardless of whether you’re buying a home to live-in or as an investment, you need to consider the market you’re buying into. Volatile markets tend to be those where home prices are increasing rapidly and are well above median home prices for the region. These areas will experience price fluctuations and if you buy when home prices are low, and sell when they’re high, then this may be favourable financially. But, if you do the opposite, then you could stand to lose a great deal of money.
Whereas if you buy in an area that is gradually increasing in value, then it’s highly likely that the stability of this region will be maintained long-term. This means that you could stand to make a good return on your initial investment.
2. Am I buying a home that could be used as an investment or sold quickly if needed?
Ask local realtors about rental property in the area that you’re looking to buy in. Find out how much would the property you’re interested in will fetch as a rental, and if it would be of interest to renters? Asking these types of questions allows you to gauge if your property would fill a gap in the market. This knowledge gives you peace-of-mind when buying as you know whether or not your property is desirable and just how quickly you could move it on if you needed to so that you can cover your costs, and protect yourself against financial loss.
3. Is this property overpriced?
If you’re looking at buying short-term or selling in less than 5-years, then you really need to consider what you’re paying for a property and how you can save more. But, if you’re planning to stay in the property for 15 to 20-years, then it’s highly likely that paying an extra $5,000 to $10,000 isn’t going to make a great deal of difference, especially when over this time property prices typically double.
4. Is my view of property buying long-term?
In order to make the best return on a property your view needs to be long-term. Sure returns can be made short-term, but you have to know your market inside and out, and you will have to buy in a volatile and, often risky market to make a good return.
Rather than looking to make a quick buck, you should be seeking to make a sound, secure investment that will grow over time. You can do this by getting into the property market faster, as on average the Australian property market grows by 5 to 10% annually.
5. How have properties performed in the areas I’m interest in buying in?
Know your areas well. Know what future developments are planned, along with expected growth. The more amenities and infrastructure, the greater the interest in the property as a rental. The less land released around your property in the future, the less supply, which means greater demand and increased capital growth. This means that your property’s value will increase faster.
The type of property will also dictate to supply and demand as well. If 3-bedroom, 2-bathroom homes are common in a development, but loft-styled apartments are rare, then it’s highly likely that the loft-styled apartment will appreciate in value faster.
6. Can I afford to buy this property?
Affordability is always a priority. If you can’t afford to buy a property in the area that it’s situated in, then don’t buy it. Overstretching your budget can lead to financial stress later down the track, especially if interest rates rise.
Instead, look for a similar property in a neighbouring area. This may make the property more affordable. If this is your first home, then search for a property that will get you into the market, not one that is your dream home.
7. Are your financials sound?
Before you go in search of a property you need to make sure that your financials are in order and that you have a good credit history. If you don’t, then it’s time to find out how you can improve your credit score. It’s also a good idea to apply for home loan pre-approval so that you know what you can afford before you start looking to buy a home.
Are you thinking of buying a home? Then contact eChoice and find the right home loan for YOU today.