By Rich Harvey, CEO & Founder, propertybuyer.com.au
A few years back, I had an eye-opening conversation with a client who was looking to buy a family home somewhere in Sydney’s middle-ring suburbs.
It had to have a certain number of bedrooms, two bathrooms, a decent backyard, and be near a quality school. That was about the extent of his criteria. As I began to ask more probing questions about growth potential, demographics, development and gentrification, he brushed me off.
“Oh, I’m not interested in property investment. We just want a family home. That’s all.”
It struck me. He didn’t know he was an investor already – even if he wasn’t a landlord with tenants. He was right in the middle of making a major investment decision without even realising it.
Of course, he was buying a place where he and his wife could put down roots, raise their kids and make life-long memories together. It was special. It was something they’d worked hard for. But that home was also one day going to form a major pillar of his retirement plans.
When I put it that way, he was taken aback, to say the least. I think many people probably think this way – that they’re not investors, when really, they are.
When your golden years approach, the family home you own could determine just how comfortable your life is doing to be. That’s why making smart choices today can pay major dividends in the years to come.
Thinking ahead
Whether buying a home to live in or an investment to rent out, all real estate decisions should be guided by thorough research and extensive due diligence. They should also carefully take into account your personal circumstances and long-term goals.
You might never buy an investment property, and that’s fine. But if your home is going to do a lot of the heavy lifting later in life, you should make sure it’s fit for purpose.
Obviously, you want something that meets your needs and wants now as much as possible. Approach your search with those criteria in mind, but also reserve at least some of your thinking for the long-term growth prospects of the home.
What’s the area like? Who does it appeal to? Who might it be attractive to later on down the track? What’s happening locally that could fundamentally change things, good or bad?
For example, there are a few suburbs in Sydney that once upon a time were leafy and peaceful but are now busy and noisy because of major road projects that have diverted traffic and dumps loads of cars onto local streets.
On the flipside, there are pockets there were light industrial wastelands not too long ago but have undergone significant urban renewal and gentrification and are now thriving and in-demand neighbourhoods.
Allowing for likely future changes before they occur will help you identify potential growth – or avoid an unpleasant surprise.
Think about your scenario now and into the future. Don’t have kids yet? You might one day, so see what the local schools are like. Are there parks and playgrounds? Is it relatively safe? Or, if you’re older and your kids are all grown up, are you looking in a location with access to the services you’ll need as you age?
What’s the public transport like? How do you rate the level of amenity? What’s the feel of the community? There are many things you need to keep in mind at a suburb, neighbourhood and street level – and they’re things you shouldn’t leave to chance.
What about the home itself?
You might find a home and fall in love with it instantly. That’s great news! That makes the arduous task of buying a whole lot easier.
But don’t let your excitement cloud your judgement. You might be easy going and willing to sacrifice some creature comforts, but others in the future may not be quite as accommodating.
Say you’ve found a character terrace in a great up-and-coming area for a reasonable price. You’re young and relaxed, so the fact it gets no natural sunlight and is a bit stuffy, musty and shut-off doesn’t bother you. But as areas evolve and move up in the world, so too do buyer expectations. If a negative feature of a home can’t be changed, its value may not grow in line with the suburb, and you could be left holding the worst house on the best street that no-one wants to buy.
Is there something unique about the property that could be a plus later on? Conversely, is there a downside that you’re willing to overlook but future buyers might not be quite as willing to accept?
For example, a house in a family friendly suburb that doesn’t have dedicated off-street parking might be fine for you for now… but will others be as forgiving? The last thing anyone with kids wants to do is cart a toddler and bags of groceries a few blocks home from where they’ve managed to nab a spot to leave the car.
While you’re looking for potential downsides, be sure to also keep your eyes peeled for diamonds in the rough. Maybe the pokey house has a floorplan that could be overhauled to create more space, function and appeal. I’ve worked with clients who’ve got an extra bedroom and living space out of a rabbit warren of a layout, adding significant value to their asset.
Likewise, you might not be in a position now to take on a major renovation project but knowing that there’s room out back to do an extension or build up gives you options – and potential value to unlock – later on.
Work with experts
There’s a lot to consider when buying a home, especially when you look at it through an investment-focused lens. Making smart choices now can pay off later in a big way.
Enlist the services of a qualified and experienced buyer’s agent who knows the questions to ask and the factors to keep in mind. They’ll help you figure out your priorities, your goals now and into the future, and the types of properties that fit the bill.
They’ll also handle all of the heavy lifting when it comes to identifying possible deals and negotiating the purchase.
It not only takes the stress out of the situation, but also puts you on the best possible path to retirement success and financial security.
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