With 15 years industry experience Margaret Lomas is considered a leader in the Australian property sector.
Her personal investment portfolio consists of over 35 properties with a value of around $10 million.
Also an author of six best-selling property investment books, and the founder of Destiny Financial Solutions, Lomas has a reputation for providing great advice on property hotspots across the nation.
Data out today from the ABS showed the first home-owners’ share of all housing loans, at 7.7%, is near an all-time low, with investors and people upgrading their family homes crowding the market. But just because conditions in the market might be tough for first-home buyers doesn’t mean there aren’t plenty of people out there thinking about buying.
Lomas shared nine tips for preparing your first house purchase with Business Insider.
Make a list of must haves/ nice to haves – things you can do without
“When it comes to where you need to live, is it cheaper to rent or cheaper to pay a mortgage,” says Lomas.
Get a pre-approval for a loan
Not only is this but it is valid for up to 3 months. It gives you clear guidance on how much money you can spend and some wriggle room to find the right home for your situation.
Ensure you can afford the repayments at a 3% higher interest rate
This buffer means that if borrowers should undergo large rates rises before the interest rate increases their household budgets should not be affected.
Spend at least four weekends going to home opens, but making no offers
Lomas says by doing this “you to get a feel for what you really want.”
This is also important to figure out what you can and cannot afford. “If you cannot afford to borrow enough to buy where you wish to live you could start on the property ladder with a property to rent purchased in a more affordable area. Many people own several properties as an investment long before they ever buy a home of their own,” she says.
Identify more than one property you’re happy to negotiate over
This way, “you will be a better negotiator and stay away from auctions – the emotions of the day will result in you paying more than you intended,” she says.
Buy in an area that is warming up but not already hot
Lomas says people need to bear in mind that an owner occupied home is capital gains tax free. “If you want to buy in an area that has not had substantial growth yet (usually affordable areas where the population is growing and infrastructure projects are in abundance) you may well buy a property which grows really well and you won’t have to pay CGT on that gain.”
She warns however, “You should be extremely careful of any area currently under buyer frenzy.” She suggests potential buyers use RP Data, a free market information site which tells you how many people are currently looking for each available property in any suburb as compared to the state average and whether the market cool, warm or hot. “High demand areas will exhibit buyer frenzy and these markets expose the buyer to high risk of paying more than the intrinsic market value. If the area you seek is currently under high demand either wait for the market to cool, or look at neighbouring areas where the buyer frenzy may yet to exist,” she suggests.
Don’t waste your time with a buyer’s agent
“Where you are looking in local markets I firmly believe [a buyer’s agent] fee is wasted and all they really offer is the ability to negotiate. Investors are far better to learn how to research markets themselves and how to become good negotiators as this way they will save repeatedly paying a buyer’s agent every time they buy and eating into their potential returns,” says Lomas.
Avoid buying off the plan
“People should be wary about buying off the plan in all situations,” Lomas says.
“These days… developers attempt to sell out the entire development on irreversible contracts which force a buyer to settle once complete, regardless of the underlying value of the property.”
She adds developers try set a price “indicative of what they think it will be worth once settled, rather than at a discount to the future price. Suddenly the risk is placed completely in the buyer’s court, with no recompense or reward available for taking this risk.”
One size doesn’t fit all
“Some properties are safe and some are the worst investment you could ever make,” says Lomas who reminders buyers that all investors are different with “different income levels and different financial goals, as well as different risk profiles.”
“No one can say that any one single asset class is better or worse for young people – they are just more or less appropriate for the individual investor’s circumstances.”
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