5 first home buyer traps to avoid
Shiny brochures, new furniture and emotional temptations are just some of the “traps” laid down for first time home buyers – and should be avoided like the plague.
That’s according to property expert, Nathan Birch, who has issued a warning to first time buyers: Don’t fall for your dream home.
House hunters should leave their emotions at the front door and make a rational purchasing decision based not on their dreams but three criteria – if the house is below market value, has high growth potential and positive cash flow.
“Shiny brochures to buy off-the-plan, modern furnishings to make the property look less dated and building restrictions are just some things to look out for,” says Birch, the founder of property investment group, Binvested.com.au.
“If you let emotion enter your decision-making process, rather than making sure the numbers add up, you lose.” Despite the increasing unaffordability of Aussie homes, there are more first time buyers in the market than ever before – especially in NSW and Victoria. New ABS Housing Finance data shows the numbers jumped to 16.6% from 14.9% in July (first home buyers as a portion of owner occupier approvals).
In New South Wales, loans to first-time buyers are the highest since 2012, with Victorian first-time buyers at the highest level since 2013.
5 first home buyer traps to avoid:
1 . Overspending on a “dream” home
Buying a first home, just like buying a new car is a largely emotional decision for many. It shouldn’t be. That shiny new car will begin depreciating the second you drive it out of a dealer, and that ‘perfect’ home you’ve overspent on won’t necessarily go up in value to the hefty price tag you paid for it.
The only way to guarantee this is by buying below market value to begin with and starting out on the front foot. Whether you’re at an auction or negotiation stage, have a clear figure in mind based not just on what you can afford, but on what the property is realistically worth and stick to it.
2. Being sucked in by display homes
Display homes don’t sell houses, they sell fantasies. When walking into a display home, you immediately start picturing yourself living a perfect life. Tasteful furniture, breezy minimalist styling – you can envisage a happier, better you. The more TV ads, display homes, brochures, billboards and marketing gimmicks you see, the higher the price of the property. You shouldn’t be copping a ‘new’ home premium.
3. Borrowing more than you need
One thing you can count on is that there will be unforeseen expenses and maintenance costs to be ready for. Borrowing right up to what you plan to spend on your deposit will leave you financially stretched and at risk of losing your home when repayments can’t be met. Always have a buffer.
4. Failing to do due diligence
Thorough research on the area you’re buying, comparative house prices and the property of interest itself is critical. Without proper pest and building reports and research on council zoning and building approvals, you can land yourself in hot water.
5. Buying a fixer-upper
Always leave emotion at the door when making financial decisions and be realistic about what you can afford.