By Rich Harvey, CEO & Founder, propertybuyer.com.au
I tell you what, the past month has proven just how keen we were to big farewell to 2020 and shake off the bad times that it brought.
The mood has been absolutely optimistic, with a renewed sense of purpose among those new clients I’ve met with in January. Most people don’t want to live their lives on hold any longer – as much as possible, anyway – and are pushing ahead with making their property dreams a reality in 2021.
I’m all for it. I think last year was such a drain on all of us. If we can embrace some of the old normal, while being safe and healthy, then why not?
I’ve been inundated with inquiries from new clients. They’re eager and excited to get cracking in the property market, but most haven’t taken a breath to think about the steps they should take first before rushing in.
There are four very important things everyone should do to achieve their property goals this year. And you should get them done by the end of February.
You want to buy a property – that much is clear. But what kind of property do you want to buy? Where do you want to buy it? And the big one…. why are you buying?
Most would-be homebuyers have only a very rough idea of their wants and needs when they begin their property search.
They open one of the popular listings websites, type in a suburb or two, and then stare wide-eyed at the results. Depending on where the market is, it could be a raging sea of options or a bare desert of very few opportunities.
But either way, leaping in without a clear sense of what you’re actually looking for can create stress you don’t need. It can cloud your search, muddy the waters and extend the time it takes to get you in your new home.
That’s why it’s crucial that you invest time in clarifying your goals.
What do you want to buy? Is it a home or an investment? Is it a home that could eventually become an investment? Is this the place you and your family will live for the long haul, or just an inbetweener until you’re able to upgrade?
What features matter most? Do you want to prioritise indoor space over access to outdoor amenities? Are you an entertainer who wants a big kitchen, a welcoming living space or a sprawling balcony, or do you prefer to nest in spacious and peaceful bedrooms?
And what about the suburb itself? Do you want a thriving and colourful culture or a quiet suburban vibe? Do you need to be close to good schools for your kids? What about public transport links? What train line or bus route do you need to be on?
Make a list of the things you need – two bedrooms, a nearby train station, one secure space, perhaps – and the things you’ve really, really like – ground floor with a courtyard, a study nook, recently renovated kitchen.
Be realistic about what you can and can’t live without. Think about what’s truly important to you, both now and into the future.
Most importantly, think about what you might be willing to compromise on should you need to.
We might be in the midst of a scorching summer but pretend it’s springtime and conduct a clean of your household finances to know exactly where you stand.
In my experience, most people know less about their finances than they think they do, and a thorough audit of what’s coming in and what’s going out can be an eye-opening experience.
Little bits of spending here and there, committed to over the course of a year, can add up over time. Suddenly, the odd new streaming service subscription or ASOS premium shopping membership can wind up costing a pretty penny each year.
Likewise, fluctuations in take-home pay that you haven’t thought about can change your circumstances.
For example, someone might’ve finished paying off their HECS debt, but not alerted their pay office to halt deductions. Or that recent tax cut, fast-tracked to take effect from Christmas, should now be reflected in your pay packet but might not yet be part of your property budget calculations.
Put aside a few hours to sit down and thoroughly examine your finances. Go through several months of bank statements to see precisely where your cash goes.
See if there are any opportunities to cut back so as to improve your surplus. Examine how much money you have in various savings accounts. See if you have personal loans or credit cards on rates that are too high and could be reduced with a refinance or consolidation. Make sure you’re not wasting money on small but quickly accumulating penalties like ATM withdrawal fees.
Last, but certainly not least, take into consideration any future changes in your finances – good and bad. This is especially important when it comes to government COVID-19 support programs like JobKeeper and JobSeeker.
Don’t put the horse before the cart by rushing into the property New Year without knowing your borrowing capacity first.
It seems like a no-brainer, but you’d be surprised how many people have no real idea of how much they’re able to borrow to buy a home.
Sure, they might’ve plugged some details into one of those free online calculators the banks use, but that’s it.
That number the automated calculator gives you is a starting point only. It doesn’t mean that a lender will give you that amount. It’s just a very black-and-white assessment of income and expenditure and should be taken with a grain of salt.
There’s also a very big difference between what a bank is prepared to give you and what you can afford to borrow.
Sure, there might be enough for mortgage repayments leftover when your bare bones crucial living expenses – groceries, petrol, utilities – are deducted from your salary… but is that how you want to live? No movie night? No afterwork drinks with friends? No holidays ever, ever again?
Buying property requires a certain level of sacrifice, it’s true. And being financial savvy and thrifty is a must. But I’m a believer in having your cake and eating to, provided it’s a fiscally responsible cake. You should be able to comfortably meet your mortgage repayments without living like you’re locked in a dungeon.
The best way to know for certain how much you can borrow, how much you should borrow, and which lender is worth giving your business to is to engage a mortgage broker. They can go through all of the nitty gritty with you and then manage the application on your behalf.
Getting pre-approval is also very worthwhile. It gives you a sense of certainty while you’re looking, as well as removing some of the hurdles involved in getting your mortgage settled when you eventually sign a purchase contract.
Going it alone isn’t just a stressful process – it can be downright risky too, with plenty of pitfalls to stumble into… or landmines to trod on.
Assemble a good team of experts who can guide you through the property journey from start to finish, so you’re making the most informed decision.
Even if you’ve bought before the unusual and rapidly changing landscape we find ourselves in means that it’s worth doing all of the due diligence you can. Surrounding yourself with qualified experts can make this process much smoother.
Your A-team should include an independent, qualified and experience buyers' agent. They can work with you to define and refine your goals, help find potential properties that achieve them, and then negotiate with the vendor or their agent on your behalf.
They remove the angst and uncertainty from the buying process by doing all of the heavy lifting for you. And they open doors that would otherwise remain firmly shut by sourcing off-market deals or working their networks to sniff out properties that haven’t yet been listed.
You should also engage a savvy and seasoned solicitor to handle all of your legal requirements. This should be done before you’ve signed on the dotted line! Ask for recommendations from family and friends, check online reviews to find someone who’s right for you.
The same goes for a finance broker. As I said, you should know your borrowing power before you begin the search for a property, and an expert can help make this process smooth and hassle-free.
Finally, it might be worth enlisting a tax advisor to help you manage your obligations and maximise your available benefits.
As is often said, failing to plan in simply planning to fail. Make sure you take the time now to stop and assess, so you can plot your success for 2021.
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