Investing in a Bright Future - Property Investment Tips and Tricks

Via

We all know that money is hard to come by, and we work darn hard for it, so when it comes time to part with our cash, we want to make sure that we spend it wisely.

Making the decision to invest in property is one such time, that you spend countless hours wrapping your head around the number of zeros that follow a figure wondering whether you really can afford to lash out, and become indebted to the bank.

And rightfully so. If we think about the average cost of a house now in Australia, I'm guessing that we'd be looking at at least $300,000 and let me tell you, that's not really going to buy you anything extravagant; that's for a patch of dirt, a standard house, in an average suburb.

$300,000; let that amount just sink in for awhile. A 30 year loan. If you buy a house at 25, and make the standard repayments, then you will be 55 by the time you have paid it off; hopefully having your kids done and dusted and heading towards retirement!

Wow!

If we break it down to the repayments level, then with the current all time low interest rates, you'd be paying almost $1500 a month, on a $320,000 loan, interest only, which means that you aren't actually paying any capital (money off of your house).

$1500 a month for interest only repayments on an average house loan in Australia. That equates to $750 a fortnight or $375 per week.

If you actually want to pay off your house loan within the 30 years, then you're probably realistically looking more like $2000 a month, and $500 per week.

Could you afford to pay $500 per week on your current wage (whether that's combined or single, to be able to afford repayments?)

Just remember, that these costs are only for the house, on top of that, you have electricity, gas, water, emergency service levies, council rates (roughly $1200 per year), food, petrol, phone bills, car registration and insurance, house insurance, income protection, maintenance on the house (as the owner, you have to fix it!), any improvements that you may like to make, a social life, clothes, gifts, travel and so much more!

So how do people afford to buy a house?

Are young people 'shut out of the market?'

How do people 'make it all work?'

My tips

1. When thinking seriously about buying a house, really consider what type of lifestyle you would like to live. We've all seen the bank adverts with the home owners staring at their belly buttons and playing with matchsticks because they have a house loan that takes up all of their money, and allows them none left over to live.

Do you just want to live life or love it?

Do you still want to travel?

Do you still want to afford being able to go to the pub for tea, or being able to buy birthday gifts, or going back to the footy club for some drinks?

If so, then it's really important to work out your budget, with all of your expenses, and then work out what kind of a loan you can afford.

2. Take advance from a bank or mortgage broker about how much you can afford financially, but use it as just that; advice. Trust me, they want to make money from you, and they will tell you exorbitant amounts of money that you can technically financially afford, but can you really afford to make those ridiculous repayments, and still live the life that you want to lead?

My partner and I were told that we could afford to buy property worth $900,000...if we have taken their advice for gospel then we'd both be working 2 jobs, 24/7 with no social life, probably extremely unhappy, stressed and frazzled, with no overseas trips or anything.

So know your budget, and the lifestyle you want to live, as it'll make it much easier.

3. Shop around; you've all heard what the experts have to say - buy the shittest house on the best street. But know what you want. Do you want a 3 bedroom or 2 bedroom house? Do you want a pantry or car parking or outside entertaining area? Are you willing to invest money and time further down the track for renovating or do you want a property that you can just walk into and it's all done? Once you have a recipe for your house, it'll be much easier to know what you want when you walk into open inspections.

4. Stick to your budget. If you fall in love with a house that is outside of your budget, you need to weigh things up. Do you really want to sacrifice your lifestyle to be able to afford payments? At the end of the day, I don't think anyone wants to become a slave to the bank, with no life, but a beautiful house.  Don't be swayed by a real estate agent. You must feel comfortable when you sign those papers. It is you that has to make the repayments.

5. Do your research. Know how much houses have gone for and are going for in the area that you are looking to buy in. Is it a good area? Are there schools and shops near by? Are you looking at staying in the property long term or are you looking at renting it out down the track? Is the public transport near by? These things are key landmarks that buyers look for if you ever want to sell your property down the track.

6. Think long term. I know that it can be scary thinking long term, but when it comes to property, it really is a must. You may not be ready for kids when you first go into property, but the chances are that at some stage you will probably be likely to have them, which means that you may need to go down to a single wage/lose a whole pay cheque. You need to be smart when budgeting and to factor this is - could you still make the repayments on one wage? 

7. Take into consideration hidden costs - there are many when buying a house. Take for example, stamp duty. Stamp duty can be upwards of $20,000. If your budget for a house is $300,000, then you should be looking for properties around $270,000-$280,000. Realistically, you need to afford stamp duty, the cost of conveyances, pest inspections, mortgage brokers, starting electricity, gas and water accounts, any maintenance that may need doing and any furniture that you may need to buy.

8. Try save for a bigger deposit; the more money you have upfront, the more money you save long term and the better deal that you will receive.

9. Be prepared to lower your standards. No body likes the idea of lowering their standards, but, when thinking realistically, you may not be able to afford that four bedroom, double garage, picket fenced property right from the get go. If you look around you, many people who own nice homes with outside entertaining areas, solar panels, and all of the works and jerks are probably 50+ and have added to the shell of the house that they bought when they were first married! 

10. Enjoy the process. I know most of these tips sound all doom and gloomy and heck..responsible, but at the end of the day, you really should enjoy the process! It is a fun and exciting time in your life. Owning your very own home is an amazing feeling - but just don't let the stress of making repayments and having your loan take over your life - get in the way of buying a house that is in your price range and still allows you to live a comfortable lifestyle.

You will probably need to adopt your life after buying a house - you probably won't be able to afford spending $200 in a weekend on alcohol, but instead, you can have friends over under your outside area, or in your  dining room for entertainment (and they can BYO!)

What tips and tricks do you have for new house owners?

Look after yourself and those around you,

Kirsty xxx

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