Is it a good time to buy?
I have been thinking of this question since the beginning of my career as a mortgage broker, and with this recent downturn in the market there are some key points I have come to realize. I am going to share this with you depending on where you are in journey of property. By which I mean, are you a first home buyer, an investor, looking to upgrade your current house? Or are you looking to move into a smaller place?
Let’s talk about the first home buyers and investors today:
First Home Buyers
If you're first home buyer my straight answer is buy. Don’t worry about the market conditions whether they are up or down. We are looking for a long-term solution and we want to stay in the property so any day it’s better than renting and spending an extra $15,000.00 to $20,000.00 on renting per annum.
The next tip would be don’t wait for the ideal scenario of having a 20% deposit, we are better of paying loan mortgage insurance than having to wait for the right deposit. If you are happy with where you rent and are not planning to move into the suburbs or cannot afford where you want to live, the best answer for you would be to buy an investment property. If you have money sitting in the bank and doing nothing or invest in shares or whatever you think will make your money work, take some risks because nothing will happen if we don't do anything. Anything that is multiplied by 0 is 0 no matter how big the number is. Taking action of finding what’s happening in the market and analyzing your situation is the best way to know what your income and saved money is capable of.
Investors
If you are getting a good deal and you can afford to buy it, you should buy it. Every investor I have ever spoken to or worked for has some goal to achieve with the investment they are looking to buy. The most common goal is to have capital gains on the property whilst saving taxes on their current income. With interest rates rising there is a huge negative gearing benefit as the rental income generally speaking would be less than the interest we are paying on the mortgage, depending upon how big our loan is on the investment property.
This also means if you are making principal and interest repayments on your investment you will have to cop some money out of your pocket every month to cover the repayments and additional property costs.
Every investor is different. Some can afford to cope with putting more money from their own pocket while some would like the rental income to cover the costs of the property. The right balance is looking at properties which are giving a good return whilst having good capital growth in the mid to long term period. As you won't be living in the property, but the property should be decent enough to live in and rented out if you are not looking for development sites.
Another key point when buying an investment property is to always see how sellable the property is in the short term as well. Why I like to think about that is liquidity is an important factor for me. In the recent market for example it will be hard to sell an investment property which is not well maintained for not easily tenanted. So for me, the price rental income, growth, property related costs and liquidity are the key factors I consider when buying a pure investment.
Everyone has different budget and not all the above factors can be covered on each property, but we need to think about whole of Australia rather than limiting our beliefs to the state we live in, and it opens up a whole new dimension to the property world.
This is some of the information I normally share with my clients and different points of their property cycles. At the end of the day all investing is risky but with the property investing the physical presence gives us a value of having an asset.
There is so much to cover and not limited to the above as I cannot cover everything on buying and investing.
I would like to point out for the all the above statements, I am not a financial or real estate expert, I am just a mortgage broker who is trying to help his clients. All of the above may not be correct for you, its is solely my point of view, I am not encouraging to buy a property nor asking you to invest your money – its simple perspective for the question is it a good time to buy or not. I hope I was able to clarify the biggest question for you, and I wish you good luck!