Owning your dream house is no doubt one of the best investments you can get. However, it’s also one riddled with problems if you don’t know what you’re doing, especially during the buying process.
That said, if you’re planning to buy your very first property in Australia, then there are certain factors you have to consider first. To help you make an informed buying decision, we have compiled 7 of the important things you should consider before putting your money on a real estate property investment in Australia.
1. Assess Your Current Budget
The very first step towards owning a house is preparing your finances. Ideally, you want to purchase a property you know you can afford based on your current finances. Most of the time, you’ll end up borrowing money from a lender; therefore, it pays to keep track of your credit score and make sure you don’t get a poor rating.
The better your credit score is, the easier it will be for your loan to be approved. If you have a credit score lower than 700, then you should take the time to repair it as soon as possible.
2. Hire a Professional Agent
Sure, purchasing a property directly from a seller will allow you to save on commission. However, without a local real estate agent to give you expert advice, you’ll end up making a lot of mistakes – most of which are costly.
One possible result would be failure to get a thorough home inspection of the said property. Without a home inspection, you won’t be able to check for any defects in the house you’re planning to buy. This can be quite expensive, especially if there are lots of areas that need repair or replacement.
Aside from that, a professional agent will be the one to handle deals and negotiations between you and your seller. He’ll also be the one to work on the legal side of things such as agreements, documentation, etc.
3. Do Thorough Research about the Area
While a property’s proximity to amenities is important, you should also consider checking things like the neighbourhood. For example, if the property you plan to buy is located in an area where there are lots of young share-houses, then you can expect to see lots of parties being held there.
You can talk with a few people within the neighbourhood and ask them what it’s like living there. If the property you want to buy doesn’t come with a garage or parking space, you want to check if street parking is possible as well.
4. Never Overlook the Importance of Home Inspection
As mentioned earlier, foregoing home inspection can cause you to deal with heavy expenses in the near future. Before you even commit to buying a property, you should check it for any faults first.
There are several types of inspections depending on the type of property. These are just a few of them:
• Pest inspection
• Land/property survey
• Electrical inspection
• Building inspection
Though these inspections may cost you somewhere around $200-$600 each, they can really be an excellent investment as they can prevent any potential expenses brought by costly repairs and replacements. Once a home inspection is done, you can then factor in the repair/replacement expenses to the property’s purchase price. Alternatively, you can instead look for an even better deal.
5. Determine the Cost of Buying a House
It pays to seek expert advice from a financial advisor as well as a real estate agent so you can get the scope of the total costs of buying a property. Here’s a breakdown of the possible costs you will incur:
• At least 10-20% deposit in order to secure a home loan. If you want to avoid paying a Lender’s Mortgage Insurance, you will need at least 20%.
• You also have to cover legal and conveyancing fees which could cost you around $1,000 to $3,000 on average.
• Building inspections, as mentioned earlier, aren’t something you want to neglect. You want to allocate around $200 to $600 for each of them to keep the property worry-free.
• If you borrow more than 80% of the property’s purchase price, then you need to pay LMI as protection for the lender in the event you fail to repay your loan. You’ll also have to cover fees for settlements, valuations, and applications. On average, a mortgage application will cost you around $200 to $600 while a valuation could range from $400 to $500.
• The stamp duty tax fee you have to cover will depend on which area you currently live in.
• Other costs you have to shoulder include utilities, mortgage repayments, home and contents insurance, moving costs, mortgage protection insurance, etc. You should also allocate at least $5,000-$10,000 savings for emergency repairs.
6. Know the Actual Value of a Property You Plan to Buy
It’s really crucial to work with a real estate agent who knows the market values in the area where the house you plan to buy is located. This is especially true if you want to avoid overpaying. Apart from the property’s actual purchase price, there are also certain fees like inspections and appraisals which can end up costing more if you don’t know how much a house is really worth.
7. Make Sure You Know the Association You’ll Be Joining
Before you make a real estate market investment in Australia, make sure you know what you’ll be getting into before you purchase a property that’s part of a homeowners’ association. Keep in mind, however, that compared to the US, Australia doesn’t have an HOA (homeowners’ association).
Instead, there is the Property Owner’s Association of Australia which is a non-profit incorporated association that’s managed by elected members who represent the interest of the landlords, investors, land developers, and anyone who has an interest in rental properties.
What sets it apart from the US’ HOA is that POAA mainly deals with property owners who have an interest in renting out their property.
Final Thoughts
Buying your own house for the first time can be a major life decision. It involves a lot of preparation, research, and of course, money. However, as long you have an idea of what things you want to look into before buying one, then you can surely increase your chances of finding a place which you can finally call “home”.
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