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If I ask you, What is property?
Property is anything that a person or business has legal title over.
Property is of many kinds, Houses, land, car, television, units and list goes on. Here we are only going to talk about residential properties. Our main topic is -What considerations are to be taken into account while purchasing the property.
Property, is such a powerful word, that every time someone tickles this topic, whether it’s your friend, your colleague, telemarketer or some advertising, our natural instinct of buying awakens because we think it is the most secure type of financial benefit not only for present but also for future.
“Don’t let them take advantage of your urge”
As the urge is already there, we are influenced by media where they convince us that it is not hard at all to get into the property market. The most common word they use is ‘Generate Wealth’. Some will say it can be done without any money at all and some will even go on to say that you can buy multiple properties without deposit or loan.
The tactics and strategies used in these promotions can sometimes fool even the most experienced. Most of them will always show the positive side, no negative side. Human brain is easily influenced by such presentations and one comes in the grip of illusive dreams where it all looks very realistic without considering its practicality for the individual.
There are so many parameters attached to buying a property that if we include all of them, this article might never end. The idea is to keep it simple enough for you to understand that it’s not about anybody else, it’s all about you, your life, your money, your future. Listen to everyone, do what is right according to you. Do not follow your friend, family or colleagues blindly, their circumstances may differ from yours.
Three most important things that define your successful decision making in purchasing a property, whether you are an investor or home owner are:
Budget, Timing and Location.
Budget–
I mean to say your deposit/saving, capacity to borrow and pay of the loan. If any one of these is missing, you cannot make a decision to purchase a property. So before making the decision to purchase the property you must be very clear about your budget.
If you want to make proper decision you will need strict budgeting. You will need to find out exactly how much you can save, you can spend and to what extent can you go to control your expenses.
Example– Say you want you buy the property and you rely on the outside source like your relative or friend for deposit, now the time has come for settlement of the loan and your source is unable to provide the amount. Now all your plans have failed which will not only be disappointing but will crush your dreams. So, depending on anyone else is full of risk. Avoid as far as possible.
In another case, sometime we go into partnership with friends, family or someone just because we don’t have enough money to go alone. Now we all know partnerships model has 30% chance of success which I think is still overrated. You may want to sell the property and make money but your partner is not interested and this creates a lot of rift. It is better to buy something small within budget. You must have spare money over and above for emergency.
Timing-
Timing means the choice, judgement, or control of when something should be done.
This is the most difficult parameter. You have money, but don’t know when to invest. Don’t buy when the market is abnormally high and out of reach of general public, and in such cases, there are chances of the market coming down, similar the case doesn’t wait till the property falls to the lowest.
There is no such formula to calculate the exact timing.
The best way to approach it is self-study, intuition, market trends and lot of research. As this all looks fairly hard, you might as well take advice from expert/trusted sources.
Example– Many of my friends, bought lots last year when the prices were shooting up and were expecting heavy profits but within days the market changed from seller to buyer. Believe me when I say they are willing to sacrifice that expected profit and they are trying to sell it at cost and there are chances they may not even get that.
Location-
Location is very important. Good location is defined by so many factors like Community of your preference, proximity to schools, transport facilities, shopping centres, medical facilities, amenities like parks, kid’s playground etc. Now be aware that not every facility is available everywhere. The price of the location differs according to the facilities.
Don’t buy the property which has no future value.
Example- In some areas of Brisbane people have bought townhouses for $350,000 around 2015. Now there is so much development going around that area. The price of these townhouses has seen a very limited growth-next to nothing. Do not invest in cheap property out of human urge of buying a property.
This is a game of patience and thorough analysis.
For first home buyers:
Be careful when you buy properties off-the-plan. Off the plan properties refer to 3%-5% deposit now and rest on completion which may be in 7-9 months, it may even take longer. Please consider this, that your loan is subject to approval when the property is complete and if for some reason, you are not able to get the loan, you may very well lose your deposit.
References:
https://www.thebalancesmb.com/why-business-partnerships-fail-4107045
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Avjeet Gill (Avi) is an accredited financial broker and a blogger. This article is a general representation of his thoughts and views. This work is a copyright of Avjeet Gill (Avi) and should not be used for personal or professional gains.
Please check with your bank or broker before you take any financial assistance. Avjeet Gill (Avi) or anyone associated with him will not be liable for any kind of loss.
If you have any questions, please do not hesitate to contact Avjeet Gill (Avi) at 0403706910 or email to avi@redtiemortgages.com.au