Comprehensive Buyers Guide
This guide contains all the information you need to know when it comes to buying Real Estate. All procedures such as how to best look for a home, how contracts work, and what you need to know to settle quickly are discussed as well as helpful advice worth noting.
Comprehensive Buyers Guide
Buying a property is a big deal. Whether this is your first property purchase or its another one to add to the portfolio it’s a considered purchase decision that takes time and should be accompanied by a strategy.
We are talking about a lot of money, generally a lot of emotion and sometimes a lot of stress. The process of buying property in QLD in our biased opinion is probably the best in the country. Buyers have the security of a contract that ties up a property upon acceptance (No Guzumping) and a number of safety nets through the conditional phase to give them peace of mind that the property will;
- Value up with the bank
- Is structurally sound
- Meets all buyer satisfaction following the legal searches process
- The loan can be serviced easily under responsible lending practices
If you go about the process with the right help, you will find it less daunting. We love this quote from the world’s best investors Warren Buffet and Charlie Munger
“If you’re going to invest, you are going to make some investments where you don’t have all the experience you need. But if you keep trying to get the a little better over time, you’ll start to make investments that are virtually certain to have a good outcome. The keys are Discipline, Hard Work and Practice”.
If you are like most people you’re probably wondering what’s the right thing to do in the current market.
Markets are markets. And like all markets they go up, there may be periods of no growth and at times they go down. Real Estate is a long-term investment. Seeing value in what you buy is the ultimate yard stick for any purchase. Like the saying goes.
Value is in the eye of the beholder
Before you transact it is important to identify the reasons you are in the property market. The following process is a great guide
- Are you an investor looking to make a solid return over a time? Are you investing for yield or capital growth? Are you looking to buy your first home? Or are you wanting to purchase your family home?
- Once you answered these questions, you should start doing some research. Prepare a shortlist of particular suburbs that suit your lifestyle and facilities that you require. Find out general property prices in the area and those that match your own financial circumstance. Find out how much time it will take for you to commute to work, where the local coffee shop is and the school catchment areas. As an investment look for suburb gentrification, future Government infrastructure investment or the capital growth of an adjoining suburb as an indicator of future capital growth. Vacancy rates are also a good yard stick for elasticity of rental increases for the future.
- Chose an area. Become an expert on the values for that area. The more specific you are on an area the better chance you have on securing that property.
- Start your search. There is so much information at your disposal through the internet. Big tip is not to rely on the major portal sites as your only method of sourcing a property. Get to know the good agents and keep in close contact with them. Some of the best properties never make the major portal web sites!! Call us to arrange a time that suits you to inspect a property. Open homes are a great way of looking at properties but do not rely exclusively on open homes to inspect properties. This approach allows you to fully assess if the property is right for you.
- When inspecting the property, it is important to cast an objective eye over the property. Rarely will you find the perfect property. Ask “Can I see myself living here?”. If it is a Yes. Have a go at buying the property.
- Calculate your budget to determine affordability. Loan pre-approval is of great importance and can guide you to where you feel comfortable gearing your purchase. This will save time and give you confidence in negotiations. You should also consider how your mortgage will be structured. How long do you want the term of your mortgage?
- Make an offer. Always demand that your offer is formulated and presented to the sellers in the form of a full REIQ Queensland Law Society Contract. If you decide to buy at auction, there are certain ways of protecting yourself and getting a great bargain. Feel free to ask one of our Sales People how to buy at auction. Couple of tips when buying at an Auction:
- Be very wary of bait pricing techniques
- Check and question everything. Do you check before you bid at the Auction?
- Do not show your cards to the agent on what your intentions are on Auction day. Agents need competition for a successful Auction. Do not give them any ammunition that will be used against you on Auction Day
- Know the value of the home and stick to your maximum price
- Consultation with a lawyer may be an expense, but well worth the money when compared to the price of a home you are purchasing. Good lawyers can speak to agents on your behalf or accompany you to auctions.
- Until the property reaches its reserve price, there is no need to bid. There is also the case of dummy bidding and vendor bidding. Both practices are used to increase the selling price and make you want to increase your bidding. You are within your rights to ask the Auctioneer if the property is on the market. Do not bid until you have clarity that the property has reached reserve!!
- You are more than likely going to be the highest bidder before you reach your highest price. Don’t let anyone know your highest price and you can save thousands by waiting for all other bidders to reveal their highest prices.
- If you are successful and the sellers accept your offer under a Private Treaty sale. This is what is called Under Contract. You now move into the checking phase of the contract process. This is when you do your checks on the property, the solicitor does all its legal checks and the bank does its checks on you before they approve the loan. You are in the driver’s seat with how the contract proceeds
- Do you want a fixed or variable loan? How will repayments have an impact on your budget? Consult your bank or mortgage broker on what is the best product for you.
- Unconditional means SOLD. As a buyer, you call when the contract is unconditional. This means you are satisfied with all conditions of the contract and you wish to proceed to settlement
- Settlement is when you take ownership of the property and the bank exchanges the balance of the purchase price in exchange for the title on the property. Your solicitor or conveyancer will arrange this process and also inform the lender that the property has been settled. Settlement can be a bit of an anti-climax of the buying process.
First-Time Home Buyers – Top 5 Tips
Buying your first home can be daunting – both financially and emotionally. It’s likely to be one of the biggest investments you’ll make, so here are our top tips:
- Start saving now House deposits can take a while to save, so it’s smart to start saving as soon as you can. Save the biggest deposit that you can. This not only demonstrates to your lender that you can exercise enough discipline to accumulate a large amount of savings, but you will also have a buffer of equity in the property from the beginning.
- Buy below your maximum price Your bank may suggest you can borrow up to $500,000 in your initial meeting, but it’s much safer to search for a home that is well below your maximum price. Buy a property that you can afford now so that you don’t overstretch yourself. Many people count on a future job promotion to help keep them afloat – but what if that promotion doesn’t come?
- Allow for extra costs There are extra costs associated with buying property. Not only is there stamp duty (You may qualify for Stamp Duty Exemption), solicitor’s fees and inspection reports are additional costs to consider, but if you choose to borrow over 80% of the property’s value you’ll be faced with lenders mortgage insurance (LMI). LMI isn’t actually for you – it’s for the lender, but you’re the one that has to pay it. These pesky extras can quickly add up and be a burden if you haven’t accounted for them. Don’t forget, interest rates are at historic lows, so be prudent and allow for at least a couple of percent increase over the next few years.
- Choose between ‘wants’ and ‘needs’ It’s very easy to confuse your ‘wants’ with your ‘needs’, but it’s important to distinguish the two when buying. Do you really need that brand-new four-bedroom house in an inner-city suburb or is it something you want? Take a good look at your salary, debt levels, costs of living, and what the repayments would be like for your dream property. Can you afford it? If not, it’s time to prioritize what features are the most important in your new home. Your first home won’t be your last, so it’s ok to compromise!
- Call and speak to a Good Sales Person who can help Don’t solely rely on the major portal sites for listings. Unfortunately, you will miss the best properties when you rely exclusively on this medium. Speak to agents. Find the ones you like and work with them. Sending emails or texts will make you just another number in the pool of many buyers. Good agents will help you buy and secure a property faster.
Purchasing off The Plan
Three things you need to know before purchasing an off-the-plan development as an investment property.
Many investors gravitate towards purchasing off-the-plan developments due to the perceived benefit they offer. Off-the-plan developments are often marketed as an easy way to enter the property investment world and glossy brochures can certainly make them look like an attractive choice. Being new builds, investors can maximize depreciation and minimize maintenance costs, which assists with boosting returns. Although this seems promising, due diligence needs to be exercised before signing the contract. Here are some tips before purchasing an off-the-plan development as an investment.
Be wary of guaranteed rental returns
Many developers offer a ‘rental guarantee’ to entice investors. It can sound like an attractive option at the time – the market rent may be $450 a week, and the guarantee is $650 a week. Sounds too good to be true? That’s because it is. Once the rental guarantee expires, the investor is forced to accept rent at the market value. Due to it being significantly lower, this may cause financial problems for investors relying on a high cash flow. A further consideration is that guaranteed rental returns are rarely an extra – rather their cost is factored into the sale price.
Don’t rely on capital growth
Capital growth by definition is speculation. Many investors are attracted to off-the-plan developments as they get to purchase at today’s prices and then not have to settle for an extended period of time – by which values may have increased. This is an appealing notion for investors – they gain capital growth before they’ve even settled. Despite this, it’s important to acknowledge that short-term capital growth is not always guaranteed. Often it’s the opposite – an investor will pay a premium price only to find that it is valued considerably less at the time of completion.
The risk of a unit oversupply is a regular constant. Investors need to consider they may face vacancy issues or declining returns once projects are completed. It’s no secret that investors make up a huge portion of off-the-plan purchases, which means the competition to rent out your apartment will be high. There have already been reports of investors discounting rent or offering enticements to tenants in over-supplied inner city areas.
As with any investment, it’s important to do your research and crunch the numbers prior to making a purchasing decision. Off-the-plan developments can be a risky investment for the inexperienced investor, especially if caution is not exercised. It’s important to consider all aspects and decide whether the development supports your investment strategy.