Keep these 10 things in mind before buying property
Buying your first property can be overwhelming. Before you sign your first property deal, your mind may be reeling with questions:
“Is it a good investment? Will the area stay nice? Will I find good tenants? Can I afford the loan? Will the banks even grant me a loan?!”
And you know what? It’s completely normal to feel like this because it’s a big decision! So, to help you in the right direction, we have compiled our top 10 tips for first-time home buyers and new property investors.
1) SMALL ACTION IS BETTER THAN NO ACTION
You will get BIG results when you continuously take the correct small steps! Start by educating yourself! View as many properties as possible before submitting an offer to purchase (OTP). Don’t buy on impulse.
Read our article on how to Build a Significant Property Portfolio With Actionable Goals.
2) HAVE CASH RESERVES
Cash is king, and you need cash reserves for the transfer fees and bond registration costs when buying a property. Also ensure you have some cash reserves available after acquiring the property in case of emergency.
3) CONTINUE TO BUILD AND IMPROVE YOUR CREDIT SCORE
If you want to finance a property, you need a good credit record. Although it is noble to have no personal debt, it is a disadvantage when you want to finance a property. You need credit to get credit.
4) HAVE THE CORRECT STRUCTURES IN PLACE
If you intend to own more than one property in the future, do not buy a property in your name. Ensure you have the correct structure (e.g. a Property Trust) in place BEFORE submitting your first OTP.
Read our article on why Not Having A Trust Is The Biggest Mistake You Can Make.
5) BUY AT A DISCOUNT
You make your money when you buy. If you buy a discounted property, you make an immediate unrealised profit that you can access in the future. There are many reasons why property sellers have to sell a property below market value.
6) USE YOUR OWN CONVEYANCING ATTORNEYS
The service with your attorney is always better, and the costs are significantly less. Always insist on using your conveyancing attorney rather than the seller’s conveyancing attorney.
7) APPLY FOR 100% FINANCING
The less of your money you use, the better. Remember, even if the bank does not give you 100% financing, you can obtain the deposit you need to put down from other sources. If you get 100% financing, you can park the additional funds in an access or flexi bond.
You can also read our article on Why a 30-Year Bond is Better than a 20-Year Bond.
8) APPLY AT MULTIPLE INSTITUTIONS
Don’t assume that your bank will give you the best financing. We’ve often gotten a better deal from a different bank! Use a bond originator to assist you with the applications.
9) REGISTER THE BOND AT OR ABOVE MARKET VALUE
Before you accept the bank’s final financing offer or grant, request that the bond amount registered be higher. This makes it easier and more affordable to refinance and apply for that amount in the future.
10) REFINANCE TO MARKET VALUE AS SOON AS YOU CAN
You can refinance the property you purchased to its new market value in the future. Do this as soon as possible. You can park it in your access or flexi bond where you do not pay interest and where it is accessible for future use.
And there you have it! With these tips from a property investment expert in your pocket, you’re sure to make a success of your first property investment.