Crucial steps you need to take to buy a home in Australia
More and more Australians are fighting to get into the property market as prices skyrocket - here’s how to get your foot in the door.
Investing in property can be a way to accelerate your asset building and wealth creation, but to achieve the right outcomes from your property investment, it’s critical you have a solid property strategy in place before you invest.
Many people ask themselves, ‘What do I need to buy a property?’ but the answer isn’t as straightforward as you might think. Here are the key things you need to be across here.
Step 1: Sort out your budget and savings strategy
The first step in buying a property the smart way should come well before you’ve been to an open home, and even before you’ve fired up the online real estate sites. People think that the purpose of a budget is to help you save more money, and they are, but that’s really only part of the story.
Another huge benefit of having a solid budget is that it allows you to know exactly how much money you have for saving, paying down debt, building a property deposit, paying down your mortgage post property purchase, or investing into other areas. This means it’s critical you put a solid budget in place before you even think about what sort of property purchase might make sense for you.
Your budget and savings strategy will most likely change, but you need a starting point. Take the time to understand what money is coming in vs what’s going out and what’s leftover. This becomes the starting point for your next step which is building your property strategy.
Step 2: Set your strategy
Many Aussies get their approach to buying property backwards. They start by looking online at real estate websites, trying to find a property that ‘looks nice’, or one they feel they’d like to live in, and then they go about building their property strategy around that particular property.
That’s the first property mistake.
When you buy property, if you start with the property and then try to make your buying strategy fit around that property, you can run into serious trouble.
The alternative is taking a strategy first approach. You get clear on your numbers, how much you can borrow and a purchase price that makes sense for you. Also look ahead at what your financial position will look like after your property purchase.
This is important because when you buy property you need to not only make sure you can afford to buy a good property, but that you can afford to buy a good property now and still afford the lifestyle you want to live and still make progress getting ahead with your money at the rate you want.
Step 3: Get clear on how much you need in savings
Once you have your day-to-day budget and the broad strokes of your property strategy, it’s likely you’re going to need to put in some work to make your property goal come together.
Saving money is hard enough, but trying to save a large chunk of cash without being clear on exactly how much you need or when you might get there is almost impossible. You need to get clear on your numbers.
Take the time to understand the costs involved in buying property; things like stamp duty and legal fees, title searches, mortgage application fees, and any other costs involved in your purchase like using a buyer’s agent or financial planner. Then add the costs together with the how much money you’ll need for your property deposit. The end result is your property purchase savings target.
Once you know what this number is, map out when you’ll get there based on your current savings rate and the money you have today. You now have a clear pathway to your ideal property purchase.
This pathway will help drive your motivation to follow your property strategy through and help get to your goal sooner.
Step 4: Build your property dream team
Many people want to know how buying a property works, and confidently answering this question comes when you get the right people around you. You’ll need a property lawyer or conveyancer, a mortgage broker or bank to help get your mortgage in place, and may want to use a property buyer’s agent and financial adviser. Choosing who you want to work with and having these people in place sooner rather than later will make your property purchase much smoother.
Before you get into the nitty gritty of your property purchase, your property dream team will be able to help you understand all the things you should be thinking about in their space. That way you can get on the front foot and start getting your ducks lined up well before you get to the pointy end of your purchase.
This will help you avoid the stress that’s so common for property buyers and go a long way to setting you up for success.
Step 5: Buy smart
Once you have your budget, a clear property strategy, know how much you need to buy property and when it will happen, and have the right people around you to support your purchase, you need to make it happen – but you have to buy smart.
There is so much emotion that’s attached to buying property – it’s easy to lose your head and end up making choices you’ll later regret. One of the most common mistakes property buyers make is the trap of price creep, where you have a clear property mandate but then get caught up in the emotion and end up spending more than you know that you should.
When you’ve already done all the groundwork to build a rock solid property plan, stick to your guns and see your strategy through. Impatience can cost you serious dollars not only today but in the years to come.
Smart planning around your property purchase will allow you to choose the right property at the right price, right debt level, and with the right amount of (good) risk, allowing you to get a reasonable indication of how your property investment is likely to unfold over time. This will help you get clear on how you can get to the next step after you buy property, whether that’s paying down debt to a certain level, building an investment portfolio, or buying another property/your dream home.
A good plan will also show you the savings impact of your purchase so you can understand what that could look like and what this means for your lifestyle goals. This will help you get comfortable that your purchase won’t force you into a position you don’t want to be in. It will also help you assess risk so you can confidently make your purchase.
Buying property the smart way starts with a solid understanding of the property buying process. This will be one of the biggest money decisions you’ll make, so take the time to get this right and you’ll reap the benefits for years to come.
Original article found on news.com.au (https://www.news.com.au/finance/money/investing/crucial-steps-you-need-to-take-to-buy-a-home-in-australia/news-story/60a0e1a9fa9e072ed740cc97dc766288) and posted on May 28 2021