Guide For First Time Home Buyers: Part 3  

How to Find the Right Property

  

(credits to Domain.Com.Au)

Your first property is arguably the most important, because it forms the foundation of your property journey. But first-home buyers generally have more restricted budgets than other buyers, and this will be the largest factor determining which property is best and where to buy.

Start your property search by making a checklist of all the features your home must have, including the number of bedrooms, bathrooms and parking spots, as well as the features that are nice to have, such as a north-facing aspect, an en suite, or a big kitchen, garage or yard.

Look online and put your “must-haves” and your budget into the search parameters, as well as your chosen suburb or suburbs. You can then make a shortlist of properties that tick the boxes on your “nice to have” list so you can inspect the property or inquire with the agent. 

If few suitable properties fall into your budget, you may need to adjust some of the search parameters, such as the number of bedrooms or bathrooms, the suburb, or search for an apartment, villa or townhouse instead of a free-standing house.

 

 

How to choose the best suburb

The area that’s right for you depends on your home-ownership goals. If you’re looking for a property to live in, the attributes of your ideal suburb might be different than if you’re looking for an investment property.

 

Property values in certain areas grow more than in others, as location is one of the main drivers of price growth. Home owners typically move or upgrade every five to 10 years, and by choosing a property that grows strongly in value, you’ll create more equity when it comes time to upgrade.

In general, property is more expensive in areas where there is a lot of demand from buyers and a limited amount of properties available. In most cities, properties are more expensive the closer they are to the CBD, where there is the highest concentration of jobs, as buyers are prepared to pay a premium to live close to work. Every city also has local areas that are more desirable than others, and these areas are often more expensive.

Although there are homes that could be considered affordable for first-home buyers in almost every suburb, these properties vary in type, size and condition.

In outer suburbs, a first-home buyer might be able to afford a new three-bedroom house, whereas in the inner-city, one-bedroom apartments may be the only properties available for the same budget.

A property located in a suburb close to employment options, good public transport and road infrastructure, well-regarded schools and childcare, as well as amenities like parks, cafes and shopping centres will perform well and continue to grow in value.

It’s also worth considering how a suburb will change while you are living there, as a lot of development may change a suburb’s character. A new train station or school can make an area more desirable, while a new hospital might create more employment opportunities.

An area can become gentrified when former industrial properties are converted to residential, new residents move in and new amenities are built. On the other hand, too much property development without the underlying infrastructure can lead to congestion and strain on local services.

Don’t overlook the importance of choosing a suburb you will enjoy living in, as this can have a big effect on your health and wellbeing. It’s also wise to look at locations near family, friends and work. Having parents and in-laws nearby can assist with childcare, while living closer to work will mean less time in traffic or commuting.

 

Should I buy a house or an apartment?

Each type of property has its advantages and disadvantages, and the home you choose depends on a number of factors. But for first-home buyers, balancing price and location will likely be the biggest concern.

 

Benefits of an apartment
  • An apartment is normally cheaper than a house in the same location with the same number of bedrooms, bathrooms, and parking spots. This can allow you to purchase an apartment in areas where you might not be able to afford a house.
  • There are generally more apartments closer to the city centre, which is advantageous if you work in the CBD and a short commute is a priority. Apartments are often located close to transport and amenities such as cafes, bars and restaurants.
  • Apartments require less maintenance than a house. Owners are only responsible for the upkeep of their individual unit, and the strata corporation handles maintenance of the building and common areas.
  • Residents of an apartment complex may have access to shared facilities such as gyms, pools, barbecues or communal terrace areas.
  • Apartment buildings are usually quite secure, and often have swipe keys to access lobbies, lifts and lock-up garages.
  • As an investment, apartments tend to have higher rental yields than houses.
Downsides of an apartment
  • Apartments are generally smaller than houses, which can mean less living space and storage. While most apartments have balconies, outdoor space is limited.
  • The smaller size can make it harder to raise a family in an apartment.
  • Ongoing strata fees can amount to several thousand dollars per year.
  • Specific strata bylaws might restrict you from owning a pet, hanging washing on your balcony, or sub-letting your apartment.
  • Apartments may have less privacy, and you might not want to live in close proximity to your neighbours.
  • Apartments can usually only be renovated cosmetically, and major changes require permission from the owners corporation.
  • Price growth is generally slower for an apartment than a house.
Benefits of a house
  • Houses are usually bigger than apartments, allowing for more living space, bedrooms, bathrooms and entertaining areas.
  • Houses come with more outdoor space, and backyards are ideal for young families.
  • Houses offer more flexibility to renovate, extend, or knock it down altogether and rebuild a new home on the site.
  • The land component usually makes up a greater portion of the value of the property, leading to stronger price growth.
Downsides of a house
  • Houses are more expensive than apartments. This may mean first-home buyers are restricted to certain areas, or will need to look for a cheaper house that needs a renovation.
  • More houses are found further from the city centre, which could mean a longer commute if you work in the CBD.
  • Houses require more ongoing maintenance, with owners responsible for keeping the structure of the building, as well as gardens, fences and garages, in good condition.
  • It can cost more to heat and cool a house than an apartment.

 

Townhouses, villas and duplexes

Offering a balance between apartments and houses, these properties are normally attached to neighbouring properties on one side or both but, unlike apartments, have their own street entry.  These properties may offer more interior space than an apartment, as well as a small backyard or outdoor area. The compact size means less maintenance than a house, but more maintenance than an apartment.

Fortunately for first-home buyers, these properties are generally more affordable than a similar-sized house, but do come with drawbacks. Some may have strata fees, and there are limitations around renovations and extensions.

 

Should you buy a house to renovate?

Homes in need of a renovation can be more affordable than new or recently renovated properties, as buyers are prepared to pay a premium for a better quality house. This can allow buyers to secure a property in suburbs that might otherwise be unaffordable.

 

By buying a home and renovating it, you can add value to the property, which makes a difference when it comes time to sell or upgrade.

If you are considering buying a fixer-upper but have a limited budget, it’s best to choose a property that only requires cosmetic updates, such as repainting, replacing carpets or perhaps updating the kitchen or bathroom, rather than one that needs major structural work or an extension.

You might also consider a property you can live in now but update over time as funds become available, rather than one that needs to be renovated right away.

 

 

How to inspect a property before purchase

Properties for sale are presented for inspection by potential buyers at several time slots per week, usually on Saturdays and one or more weeknights. Some homes may be only available for private inspection at times arranged with the agent.

 

Open home inspections normally run for 30 to 45 minutes, so it’s important that buyers know exactly what to look for beforehand to make the most of an inspection.

  • Make a checklist – Write down the features you want in a property, dividing them into “needs” and “wants”. As you walk through the property, tick them off the list. You may be inspecting multiple properties, so a checklist can help jog your memory later.
  • Take pictures and notes – A real estate listing or brochure has a limited number of photos, and vendors and agents may choose the photos carefully to make the property look better than it is. Use a smartphone to take photos of every room, exterior features, and any damage or issues with the property. Take a pen and a pad spend a few minutes immediately after the inspection taking note of what you liked and didn’t like.
  • Focus on fundamentals  Look out for key features of the property. These could include the level of natural light, how busy the street is, which way the property faces, the slope of the block, and which properties neighbour the home. Also make note of the age and condition of the kitchen and bathroom, as you may need to allow room in the budget for renovations further down the track.
  • Ask questions – If you have any questions about the property, ask the agent while you are there. Key queries include when it was last renovated, why the vendor is selling, how long they have lived there, what is included with the property, whether there have been any offers, and whether there are any known issues with the property.
  • Get professional help  It’s also important for house hunters to realise their limitations, and call in a professional to check for hidden problems. A building and pest inspection by a qualified professional is essential if you’re about to spend hundreds of thousands of dollars on a property.

 

What are the essential property inspections I need to arrange?

Every buyer should have a building professional inspect the property before purchase. A building inspection won’t just uncover the hidden problems of your new property, it can also be used as a bargaining tool to save you thousands of dollars off the purchase price.

 

The vendor is required to disclose to you certain defects relating to the property but this goes only as far as the vendor is aware of the defects. It’s often the unseen defects which can go unnoticed that may end up costing you thousands of dollars in repairs.

For example, a newly painted ceiling could disguise black mould and broken or leaking roof tiles. A freshly tiled bathroom could be a cheap and nasty renovation that failed to lay the essentials such as waterproofing. Freshly laid floorboards might cover wood rot, pest damage or rising damp.

It’s best to engage an independent building inspector to carry out and prepare an inspection report. Most companies will offer a combined building and pest inspection, which checks for defects as well as pests including termites and borers.

If you’re buying the property through private treaty, your inspection should occur either before exchange or during the cooling off period after exchange. That way, you can arm yourself with knowledge that you can use to negotiate down the purchase price, request the vendor makes repairs to address your concerns, or back out of the sale altogether.

The case with auctions is different. The laws differ in each state but, generally, a purchaser buys a property as is on the fall of the hammer. Ultimately, you need to be 100 per cent satisfied with the property before you bid.

In this case, it’s better to arrange a building inspection before the auction, so you can make a reasonable offer and don’t get caught bidding for more than you bargained for.

A building inspection report will cost about $500 but, by arming yourself with knowledge, you could save thousands of dollars.

 

What is a strata inspection report?

When buying an apartment, it’s worth investing in a strata inspection report, which explains any problems or issues with the apartment building. A report costs about $300, but it’s worth the expense to avoid potential problems that could arise after purchase.

 

The report details the financial health of the strata scheme, outlining regular levies and any proposed special levies, income and expenditure, defects and insurance, as well as compliance with laws and any disputes.

 

How to review a contract of sale

A conveyancer or solicitor should be engaged before purchase to review the contract for sale. The contract will contain information about the purchase price, settlement date, the zoning of the property, any special conditions or deadlines, and any matters relating to title such as covenants, restrictions, or easements.

 Conveyancers may either charge a small fee for this service, or provide the service free of charge on the assumption that the buyer will engage their services for settlement.

Buyers should request a copy of the contract for a property they are interested in as soon as possible to allow enough time to have it reviewed.

You can review the contract yourself to look for potential deal-breakers but, when it comes to actually making an offer or bidding at auction, it’s best to hire a professional to look over it.

 

 

 

(photos credits: Domain.Com.Au)