You need to cover more than the cost of the actual property. You have to foot the bill for a number of transaction costs and costs associated with getting a loan and getting legal advice. These costs can really send you over the financial edge if you don’t budget for them.
Owning a home also involves expenses you may not have had to carry while you were renting. You’re now the one who has to pay the council and water rates, for that new hot water system and to keep the house looking good over the years. Stretch the repayments too far over the limit, and owning a new home isn’t going to be much fun at all.
Another Property Is Always around the Corner
When you miss out on a property that tugs at your heart, you may feel like you’re never going to find a property you can both love and afford. Keep going. Fortunately, new properties keep coming on to the market each week, and eventually you’re going to find the one that fits your criteria and your budget.
You may need to make a compromise on your criteria here or there, but don’t settle for something you’re not going to be happy living in for at least a couple of years. Chopping and changing properties more often than that is too expensive to contemplate.
Have faith that with consistent searching and effort the right property eventually comes along and is available at a price that you’re able and willing to pay.
Don’t Pay Too Much for a Property
Each property has a fair value. Don’t be too desperate to find a home. You don’t want to pay more for a property than it is really worth — in terms of its location and in terms of the property itself. First, paying too much can mean you have less to spend on improving your property. Second, you’re going to have less equity in the property, and your loan-to-value ratio (refer to Chapter 13) may go over the 80 per cent level — meaning you have to pay mortgage insurance, which adds several thousand to your purchase price.
Do your research on how much properties in a particular area are worth, and make sure you get a building inspection report so you’re aware of any problems with a property and how much it costs to repair them.
Keep Your Emotions in Check When Looking at a Home
Deciding you want to buy a home can be a bit like falling in love — sometimes your emotions can overwhelm your reason. You can fall for a property that looks gorgeous on the outside but may not be suitable to your needs. That cute white picket fence and those gorgeously painted ceiling roses may conceal a host of structural problems that could cost a fortune to fix up.
Retaining a business-like reserve when you’re looking at one of the biggest purchases you’re ever going to make pays you back handsomely. Take along a hard-headed friend you can trust to point out negatives when you look at properties. And if you really fall in love, get a thorough building inspection done before you make any serious offers. You should at least know about a property’s faults before you commit to it.
Be Sceptical of Selling Agents
With rare exceptions, remember that the real estate agent isn’t your friend — even if the agent pretends to be. It’s not that agents are against you; the agent’s just working for the sellers of the homes the agency represents. The agent’s primary interest — and, in fact, a legal obligation exists — is to sell those properties for the highest prices possible. So when agents take you aside to tell you about the special prices they can get for you, be aware that they probably say that to everyone.
That’s not to say that an agent can’t help you find the home you’re looking for. When you get to know the agents in the area, they’re more than happy to inform you about properties that fit your bill. Agents can help you to forge a win-win situation that helps both their clients and you. Just don’t expect any special favours just for you.
If you want an agent whose loyalty is totally dedicated to you, get yourself a buyers’ agent. (Refer to Chapter 4.)
Renovating Can Wait
Most first home owners don’t have much spare money to think about anything but the most basic renovations after they buy a home. But rushing into the renovations may not be the best approach. You need to give yourself some time to live in a property to see how you can improve it to better suit you and your family.
By living in the home for some time, you get a sense of how your family uses the property and you can identify
How much time you need to save some money to put towards your renovation.
How much you can afford to spend on your renovations.
How the inside interacts with outdoors.
How the sun moves through the home.
What are the bad features you just have to remove.
What are the good features you want to enhance.
Which rooms work and which don’t.
The Mortgage Does Go Down — Eventually
When you buy your first property, your mortgage can feel like a huge weight around your neck. You’re committing to an enormous amount of money, it’s true. And for the first couple of years, you may have to deny yourself many of the treats you’re used to — eating out, buying CDs, travelling overseas — just to scrape together those monthly repayments.
After a few years of owning your own home, financially positive things begin to happen:
You pay down the principal of the loan and the interest repayments start decreasing as well — almost infinitesimally at first but, after a few years, the interest amounts become noticeably smaller.
As long as you stay employed, your wages are probably going to keep increasing. That means that the interest payments become smaller in another way — as a proportion of your income.
If you buy well, the value of your home may also go up, so that the amount you owe to the lender also becomes smaller (as a proportion of your home’s value). At the same time, your equity in your home becomes greater — without you doing anything much at all.
Of course, if you decide to borrow against the increased equity in your home, you’re heading for a bigger loan and being back where you started — but at least you know you’ve got a growth asset on your hands that you can sell if your financial situation changes for the worst.
For more information on how a mortgage works and how to sift through the variety of options available, refer to Chapter 10.
Chapter 15
Ten Areas (Almost!) to Check at Open Homes
In This Chapter
Detailing the important features of each area of the house — inside and out
Working out what’s necessary, and what’s not
Determining whether a room will suit your lifestyle
In the excitement of finding your (potential) dream home, the job of checking for all the necessities, and some niceties, can easily be overlooked. In this chapter, I cover some basic items you should look for in just about every room or space in an average house or flat.
Checking for these key things will help avoid any last-minute panic when you’re signing the contract to buy the home, desperately trying to remember whether you checked the water pressure or if the oven worked properly.
Kitchen
You spend a lot of time in the kitchen, so it’s vital to ensure this area in your new home is going to meet your specific needs (even if you end up renovating later). Here’s a list of some key kitchen features to look for as you hunt around an open house:
Benchtops and splashbacks: Do you prefer granite benchtops and glass splashbacks, or laminate and tiles? Check the condition of the benchtops and of the grout and sealant around the tiles, sinks and splashbacks. Also check the amount of bench space and whether it provides you with enough preparation room.
Cooktop and oven: How will you heat your food — gas? electricity? induction heating? thermonuclear power? (Keep in mind electricity is more expensive than gas.)
Extraction fan/range hood: Check for an extraction fan — you’d be amazed how many homes don’t have one and you often can’t install one retrospectively. Also check the effectiveness of the fan — and the noise level!
Fri
dge space: Have a look at the space for the fridge. Is it wide or high enough to fit the fridge you already own?
Floors: What are the floors covered with? Are you happy to care for a wooden floor, or would you prefer to quickly mop tiles? Avoid carpet!
Hidden extras: Does the kitchen come with a dishwasher already installed — or at least have a space (preferably next to the sink) to install one easily? What about some standing room? I don’t know about you, but people at my dinner parties always end up hanging around while I finish preparing the food!
Power and phone points: How many power points have been installed, and where are they placed? Are there enough points to accommodate a fridge, toaster, kettle, microwave and other less-frequently used appliances? Is there somewhere to plug in a phone or modem?
Storage solutions: There’s lots to store in a kitchen, so inspect the pantry and the number (and size) of the cupboards. Make sure you don’t lose too much cupboard space to a hot-water service, dishwasher pipes or sink plumbing.
Bathroom
The bathroom in your new property might have last been renovated in the 1950s, meaning every item is a fetching shade of pink. But if your budget won’t stretch to renovating the bathroom as soon as you move in, you’ll be stuck with the current fittings for a little while. Examine this list of features to see whether the bathroom is functional for your needs:
Bath/shower: Does the bathroom come with a bath, shower, both or a ‘shub’ (shower over a tub)? If there’s only a shower, can you live without long baths after a hard day at work? Or are you more of a ‘four-minute shower’ person? (And congratulations if you are, given the droughts we tend to have in Australia!) If you have children, or are planning to, having a bath might be a must-have. If a short but sharp shower is important to you, remember to check the water pressure.
Bathroom vanity: No, I’m not talking about spending too much time in front of the mirror! I’m referring to the sink and cupboard unit that’s fairly standard in a bathroom. Does it come with a mirror? If the vanity doesn’t have in-built drawers or cupboards, is there additional storage, or at least room to install a stand-alone set of drawers to house all your essential bits and pieces?
Power points: Even if you’re pretty low-maintenance, you probably use a few electric appliances in the bathroom, such as a hairdryer, electric toothbrush, shaver or hair straightener. Check the availability and placement of power points. Or, you might be into the bare essentials, and not need any of this at all!
Steam clearing: You’ll need something to remove the steam while you’re bathing, to prevent mould from appearing on the bathroom walls. Is there an extraction fan? At the very least, you’ll want a window that opens — but if the bathroom’s on the ground floor, make sure the window has a lock to prevent unwanted visitors (human and otherwise) from creeping inside. Also check what the window looks out on.
Washing machine taps: If there’s no separate laundry in the house, or no communal laundry in the apartment block, then you’ll probably find some washing machine taps in the bathroom. Check that there’s enough space to fit your washing machine, and some room to sort your washing.
In modern properties or renovations, you might come across what’s known as a Euro laundry, which usually means space for the washing machine (and perhaps dryer) is tucked away in a cupboard or in the kitchen. Check the space provided is sufficient.
Lounge
The lounge is the perfect place for entertaining guests and spending time with family. But what if you move in and find there’s not enough room for your lounge suite? Here are some features to look for before you commit to buying a property:
Extra space: Lots of lounges flow on to balconies or into the backyard. Does the property have doors or windows that allow you to bring the outside in?
Heating and cooling: Do you swelter in summer without air-conditioning or do you really feel the cold in winter? Or do you prefer to keep your gas and electricity bills down? Numerous heating and cooling options are available: Reverse-cycle or split-system air-conditioners, ducted heating and cooling, open fire places, ceiling fans, hydronic heating, bar heaters and gas wall panels are all possible. Check out the heating and cooling options provided and whether they fit in with your requirements.
If the property doesn’t come with any heating or cooling options, you can always buy a free-standing floor fan and heater.
Flooring: Tiles, floor boards or carpet are the main flooring options in a living area; think about what works best for your location and lifestyle (and whether you can afford to change the current flooring, if it doesn’t suit your needs).
TV and phone connections: Some people prefer to keep the TV out of the lounge, but if this isn’t the case for you, check for an aerial plug. Paid TV services may also be a non-negotiable in your household; if so, you’ll want to see if the cabling has already been installed. (Don’t forget to check for aerials and satellite dishes outside!) Similarly, you may want a phone in the lounge and, given the rise of internet television, an internet connection in this room could be very handy too if you want to avoid cables trailing through the house or apartment.
Dining Room
Older properties usually have a separate, or formal, dining room. If you do a lot of entertaining and have a large dining table, take some measurements of your table and chairs before you head off to the open home, to ensure it will fit into the dining area.
If formal dining isn’t really your style, check whether another use of the separate dining room is possible and practical.
More modern homes or renovations will often have open plan dining areas, usually adjoined to the kitchen, lounge or both. This means that the space is not (usually) as restricted as a separate dining room. Check that the flow of the open plan space fits in with your lifestyle.
Bedrooms
When looking at the main bedroom of the property, check the following:
Clothes storage: You’re going to need to hang up your clothes (unless you’re a teenage boy — in which case, plenty of floor space is probably your best bet). Some wardrobes come with built-in shelving units, but if the wardrobe installed only has hanging space, check you can fit a chest of drawers in the room. If the room has no storage (sometimes the case in older properties), you may need to purchase a free-standing wardrobe.
Ensuite: For some, not having an ensuite isn’t a deal-breaker, but if you have children or often have guests staying, you may consider it to be. If this is the case, check whether the bedroom has an ensuite and that it meets your needs.
Flooring: Carpet? Wooden floorboards? Remember that this will affect the temperature of the room throughout the year, so take the climate of your location into consideration.
Heating and cooling: For maximum comfort in the summer months, and to stop you from freezing in winter, don’t forget to look for heating and cooling systems, in whatever form you prefer (air-conditioning, ceiling fans, under-floor heating and so on).
Phone and TV connections: If you like to watch the TV in bed or while you’re getting dressed in the morning, ensure the bedroom has an aerial plug. You may also want a phone jack near the bed.
For properties with more than one bedroom, apply most of the preceding points to the second and subsequent bedrooms.
If you’re planning to turn one of the bedrooms into a study, make sure to check for sufficient power points for all your computer equipment.
Laundry
Many older and/or larger homes have a separate laundry, and you may feel having this extra space is an added feature. If the property you’re inspecting has a separate area for laundry, here’s a list of what to look for:
Bench space: If you’ve got a top-loading washing machine, then you may want to look for extra bench space for folding clothes, storing washing powders and hosting a central repository of unmatched socks (where do the other halves of the sock pairs go?!).
Dryer brackets and ducting: Bringing your own dryer? Investigate whether there are brackets to
attach the machine to the wall, and ducting to move the hot air outside.
Sink and cabinet: A deep sink in the laundry is useful for soaking and rinsing — or bathing small children if the property doesn’t have a bath! If you do have children, check whether the cabinet can be secured, so you can store nasty liquids and powders out of harm’s way.
Buying Property For Dummies Page 26