Property Buying Tips
Buying, selling or renovating a property can be a daunting and stressful experience. Here are a few tips to make your property experience a smooth and enjoyable one.
Vital Research.
Many home buyers do very little research before investing their hard-earned money. Do your research. Inspect as many properties as is practical, it may take you a couple of months however it will be time well invested. If you're short on time, a professional buyers' agent can search the marketplace for you.
Get your finance sorted.
You should not be looking for property without first having finance approval in writing. This will not only help you feel more confident and avoid the disappointment when you find a property but the lender will not approve you for the amount you require, it will also give you an advantage when there are multiple interested parties for a specific home. The fact that your loan has already been approved is of great value to you when negotiating, as any offers you make you know you can back up because you already have the lender's approval.
Pest and building inspection.
Do a pest and building inspection before you buy. Go over the inspection report with the inspector and make sure the report was done by a professional organization. Don't take anything for granted ... inspect everything!
Empty house.
When looking through a property, imagine it with no furniture and no trimmings. Don't be swayed by beautiful furniture ... it leaves with the owner or the hire company.
Condition of the home.
Buying a home in need of renovation is a great way to get into a market that you otherwise couldn't afford. But a home that needs major repairs can become a costly venture so ensure you have the reserve funds to fix it up or you could be living in a half-finished property for a while. Make sure the purchase price is seriously adjusted to reflect the repairs needed.
Affordability.
Purchase at an affordable level: carefully consider your income level and living expenses. Take into account future considerations such as; getting married, having children, additions etc. Your dream home is certainly worth a sacrifice but don't mortgage your entire future for it. Budget for interest rates to be at a two percent higher level than they are now and see if you can still afford the repayments.
Costs & Expenses.
Check out all your costs and expenses before you sign: taxes, insurance, maintenance, council and strata fees etc, if applicable. Make sure all the utilities are on (gas, electricity, and water) so you can inspect everything in working order. Click here to calculate your purchase costs and avoid surprises.
Pre-Settlement Inspection.
Do a pre-settlement inspection: visit the property on the day of settlement or after all the furnishings have been moved out to be sure there are no surprises. Be absolutely positive the property was left exactly as you had agreed upon in the contract. Many times, things are unintentionally overlooked or damaged by a removalist company that could have been spotted in a final walk-through and resolved prior to settlement.
Check the contract.
If it's not in writing, it doesn't exist: all promises and discussions are to be in writing. Don't make any assumptions or believe any assurances. Even the best intentions can be misinterpreted. Having an ongoing log (in writing) of all discussions can be a valuable and worthwhile exercise.
- Set a budget and work out how much you can afford
- Think about the initial deposit and mortgage repayments
- Research fees such as stamp duty & mortgage insurance
- Get your finance sorted
- Do a pest and building inspection before you buy
- Don't be swayed by beautiful furniture in the property
- Purchase at an affordable level
- If it's not in writing, it doesn't exist
Extracts from www.property.ninemsn.com.au
More info
Positive & Negative Gearing
What is Positive Gearing?
Positive gearing Occurs when a property yields an above average rental return for the purchase price and/or expenses are lower than average. This means that your return outweighs your expenses, which means you have extra money (or extra income) in your pocket each week. That means that with each property you buy, your income increases, lifting your power to service more debt and invest in yet more property. So theoretically, the capacity of the positively geared investor to borrow money for more properties rises with each purchase.
What is Negative Gearing?
Negative gearing occurs when you borrow money to buy a property that has more expenses than income. This means you lose money every week. This loss can be partially offset by some of your income tax being returned to you, but there is still some money required from your pocket to make up the shortfall.
EXAMPLE: In order to get a property loan, you need to be working so you can show the lender that you have an income to service your debt. If you have an income, then you must be paying taxes??? The advantage of buying an investment property is this now becomes a business for you. As a business, certain expenses related to operating this business become tax deductible. Things like Interest on your loan, Rates, Taxes, Insurance, Maintenance plus certain other claims now become possible. Secondly, if you were to buy a new investment property, the government allows an annual depreciation allowance that is also claimed against taxes you are presently paying on your wages/income.
Various properties have different allowable depreciation schedules but for the purpose of this example, based on purchasing a brand new $300,000 property, I have estimated annual claims to the value of $26,000. This means that if you earn $65,000 per annum presently, you would be paying around $17,900 in PAYG tax. However, by now having this investment property, the annual claim of $26,000 is deducted from your $65,000 wage which means your annual income is only taxed at $39,000. Hence, instead of paying $17,900 a year in tax, you only pay $7,990. Basically if set up correctly you will receive $191.00 rebate from the Tax Man each week. You have now purchased real estate whereby the tenant pays $320 per week rent and the tax rebates contribute $190 per week which means the actual cost to you for buying and servicing this property is only $55.00 per week.
I believe that wise investors would have a split portfolio of both Positive & Negatively geared investments.
NB: Please obtain independent financial advice before entering into any form of investment.
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