Five tips for young property investors
We millennial’s are growing up and not just buying our first home, a clever few are ready to become landlords. As a qualified property valuer I’ve helped quite a few friends now through the buying process. I’ve watched what should be a happy event turn into a joyless, sleep deprived and stress filled experience. You don’t know, what you don’t know. Here are some brief tips for those looking to take the next step.
1. Have a massive deposit.
This is one most commonly gawked at. How can I save $100,000? You’re crazy! Back to the smashed avocado argument made famous by Tim Gurner. Generally speaking, if your home loan deposit is under 20% you’ll be paying Lenders Mortgage Insurance (LMI). The amount you pay is influenced by a number of things and it’s best to speak to your lender directly to see where you sit and how much this will cost. LMI is ordinarily applied directly to your home loan. You can play around with online calculators to see the amounts that would apply for your price range. Without some sacrifice, creative saving ideas or other assisted ways of scrambling cash together this will be another fee to swallow. Quite obviously also, the more you put in now, the less you’ll pay overall. Interest and it’s effect over the life of the loan can never be overlooked.
2. Do your homework
This will likely be one of the biggest purchases of your life. It is well worth spending the time researching the suburbs you’re look to buy in. Don’t look only at property listings in your price bracket to know an area. Go to as many Open for Inspections as you can. Afterwards, call the agent and find out how much the property sold for. This will make your future self very confident when it comes to putting a number on paper because you know what money gets in an area. Speak to local agents in general terms, use online property reports and calculators. Don’t be blinded by the pretty kitchen, think about why someone else would want to live there. Location is always key.
3. Look at insurance products.
Landlords insurance, income protection insurance, title insurance, the list goes on! Homework time again but investing in these products can provide some real comfort. Title insurance for example can be relatively cheap and is not widely publicised.
4. Don’t listen to your friends, listen to professionals
Property is complex and diverse topic. Getting advice over a beer on a Saturday night may seem temping but it’s probably not in your best interests. Certainly, use your peers for professional recommendations. There is a lot of wonderful mortgage brokers, building and pest inspectors, real estate agents, buyers advocates and conveyancers doing great work out there. Use your friends to get their contact details, then listen to the professionals specific advice for you and your unique situation. Blanket rules just don’t exist. I also recommend you get this dream team behind you before you put in any written offer. Each professional will have their own little piece of advice to help you along the way.
5. If your planning to do reno works…
If you’ve found the ultimate property but it needs a little work make sure you include a good contingency percentage in your budget. Things can (nay will) go wrong and you need to be prepared. We think between 5 and 15% is a good amount and depends on the scope of your proposed work and their risks. If you don’t end up eating into the contingency allowance and have money left over at the end of the project, awesome! Use it to treat yourself to the smashed avocado you so longed for in your deposit saving days.
Written by Nadia Ditrocchio
Nadia is a Certified Practicing Property Valuer with 13 years experience.