Start asking better questions if you're serious about getting into the property market.
John J Maxwell | June 26, 2017
Pick up any newspaper and you're bound to see copious articles on the doom and gloom about how unfair it is that property prices have risen out of reach in many areas. It's very easy to get sucked into the remorse and resentment of this and without even realising it, it becomes your mantra and the 'reason' why you can't buy your own home.
The quicker we realise this is an excuse and holding onto this as your 'truth' will play out that path and serve to stop you from achieving the goals you really want. Focusing on what you can't achieve is not worthy of your energy and attention.
Speak to any seasoned property expert and they will tell you one of their most prized possessions or attributes is - their attitude towards investing. If there's one thing that every successful property person has, it's their unwillingness to accept NO as an answer. They also will tell you of their sacrifices - the luxuries they gave up to ensure they met their goals. Many were ruthless in what they went without.
If you're dead serious about getting into the property market - then it will serve you to focus your attention on HOW you CAN make this dream a reality. Of course, the market has moved higher in recent years to make it more difficult in certain areas, but if you have saved what would be considered a 'reasonable deposit' to buy property there's a few things you can consider on your journey to property ownership.
Let's agree that savings of $40-50k would be considered a reasonable amount to save. Most complaints I hear are relating to not being able to 'get started' in property rather than how to build or maintain a portfolio. A change in mind set may be required to get you in the market now. Many are considering buying as an investor now and building towards a home later when you've built up some equity.
Here's my 5 Property Starter Tips to enter the market now:
Where CAN I buy at a reasonable price. If you speak to property experts and do your homework you can find regions with sufficient population, employment and infrastructure which are still at a reasonable price point. You can still purchase well under $300k without going to remote regional town you've never heard of.
What can I buy with $40-50k? You'll be surprised what you can find when you star searching. Many smart investors are buying investment properties 'unemotionally' and at the lowest prices possible. for example. one of my investor client recently purchased a studio apartment in the inner suburbs of Melbourne for under $300k. Yes, that's correct. The price was $270k and the rental return is $320 p.w. Look further abroad and speak to agents who are local to the area where you are looking.
Pool your family resources. Can't afford to buy in the region you live but would still like to? If you look to other cities which have already seen massive population growth such as London, Hong Kong and other large cities, and you'll discover that property buyers became more innovative. Some purchased together with siblings or other family members. Where possible it's often a good idea to purchase together with family, especially your parents as there can be incentives on stamp duty concessions and property transfer. However, not everyone has access to be able to do this - bearing in mind, each all applicants combined need to contribute sufficient incomes and deposit required for the purchase (don't forget to include rent if the property will be an investment property, even for the interim several years). When you break it down, two family couple could combine resources to buy a rental property of $600k or more. Advice: Speak to your mortgage professional to work out the numbers required based on both, your combined incomes + savings / deposit.
Your friends may be closer than you realise. In the absence of suitable family members to purchase with, it might we worth having a chat with your close & trusted friends. It's best to make sure your goals and time frames are aligned and consider all facts and risks before you enter into any agreement hastily or emotionally without realistic understanding of exactly what is required by each party involved. Advice: Speak to a professional Financial Planner about planning your assets, insurances and budgeting. It would also be a good idea to speak to a good Accountant to discuss suitable structures, appropriate ownership percentages and asset protection. You may also be referred to speak to a Solicitor to ensure you have sufficient agreements in place relating to your circumstances and wills and power of attorney.
Manage your priorities - budget your cash-flow. Now that we've agreed that many regions such as a large part of Sydney and Melbourne have grown at a lightning pace and are out of reach to many buyers, if you haven't yet saved a reasonable amount to get into the property market right now ... keep going! Don't give up. Use a budget to cut back on unnecessary and emotional spending. Once you have cut back all you can, look towards your incomes - time to ask for a pay-rise or upgrade your job to one which is higher paying? Maybe you can get a second job and save ALL of the extra money.
Hopefully, the above tips have inspired you to take a more positive view on how you CAN get started in property, maybe not in the higher priced suburbs, but you can still do it with determination, research and grit. The difference, two, three or four incomes and deposit contributors makes can be everything you need to buy. Often it doesn't take long before you're looking at purchasing your second or third properties together. If there are three of you purchasing together - once you purchase your third property - essentially, you each have one!
You should also consider, if all buyers will be living in the property you may still qualify for the first home buyer grant and stamp duty concessions. However, you can only use this once between each buyer - all other parties will forfeit their grant. Many clients have told me of their negotiation skills to barter a favorable price equal to or greater than the government grants, so don't worry about holding onto this grant.
Finally, make sure you keep abreast of the mortgage policy changes as many lenders are starting to and are likely to restrict lending policies further - especially for investors and interest only loans. Some are restricting lending to a maximum of 70% of the property value. Your mortgage professional can assist you with advice on which lenders are still lending 80% or even 90%. They will also be able to advise you on lending policy relating to living cost considered for all borrowers relating to singles and couples and any existing debts including credit cards, mortgages, personal loans and car loans.
Where possible, try to restrict your borrowings to 80% to avoid paying unnecessary Lenders Mortgage Insurance costs with prime lenders. Some specialist lenders may still charge a risk fee or equalisation fee depending on all of the circumstances when you are purchasing. For this reason, Always do your finance homework and present your information to your mortgage professional BEFORE you sign a contract to ensure you have a pre-approval and understand exactly what 's required by each borrower.
John J Maxwell, senior mortgage and finance consultant, Cocalex Consulting
If you have any questions or contributions relating to this article, please take the time to comment below and share your thoughts or opinions for the benefit of others reading this. No doubt this topic commands interaction, innovation and collaboration. The more answers that are delivered, the more questions that will arise. If you have any personal questions or queries, please feel free to contact me.
About the author:
John Maxwell is founder and Senior Finance & Business Strategist at Cocalex Consulting. John has over 17 years' experience in the financial services sector, and has owned and managed 9 mortgage franchises and has developed a background across the holistic financial services realm. He has particular focus and passion for: Leadership Training and Development, Franchise Development and Business Networking.
