With property prices skyrocketing in certain parts of Australia, the likelihood of snagging a home without cashing in a hefty inheritance or having help from mum and dad, is getting slimmer and slimmer. But there are options available for first-time property buyers.
Tip 1: Become a rentvestor
This could be a useful move for first home buyers looking at alternatives to owner-occupation. Many people decide, when conducting their home loan calculations, to purchase real estate outside capital cities (or on the outer fringes), where housing may be more affordable. From there, they might rent in their preferred location. Colloquially dubbed 'rentvestors', this group has increased in popularity over the last few years.
Tip 2: Consider an apartment
First home buyers often get caught up in the notion that their first property purchase needs to be their dream home. The reality is that many people will purchase more than one property in their lifetime and apartment living may be just the ticket for first time home buyers to get their foot in the door.
Tip 3: Buy to renovate in stages
There is a reason the term 'fixer-upper' exists, after all. Buying a less-snazzy home in a good or growing area at a bargain price could well be an excellent purchase choice, particularly if most of the issues are purely aesthetic ones that you can fix yourself. However, before doing this, it is even more important than usual to get a property inspection to make sure the damage is only superficial.
Tip 4: Leverage government home buyer grants and concessions
Buying a home is a big step and it's easy to be daunted by the large sums of money involved. With careful research of state and local government grants and concessions, some first home buyers may be eligible for assistance provided that certain conditions are met. For instance, new home owner grant recipients in NSW need to live in the home for a period of time, so these people can’t ‘rentvest’.
Tip 5: Interest only home loans
Loans with interest-only repayments are becoming a popular form of a loan. Basically, this type of loan allows you to make interest-only payments over a set period of time, before converting to interest and principal repayments for the remainder of the loan term.
With an interest-only loan, your repayments are smaller for the interest only period but usually increase once the interest-only period ends and the principal becomes included in the loan repayment. If the interest-only period has a fixed interest rate, you also would need to take into account the timing of fixed interest rate periods and their conversion into a variable interest rate.
Tip 6: Find someone to purchase with
Pooling of resources may also be an option. This could potentially help you get into the property market sooner, but there may be some pitfalls with this option. Legal obligations and identifying the responsibilities of each person involved could put some strain on relationships. Research can’t hurt, and you’ll need to do a solid amount of work if you intend on pursuing this option – seeking professional advice is essential.
Growing up in Australia means many of us have all been conditioned to think we should be striving towards the "Great Australian Dream" of home ownership and a quarter acre block. However, it might just be time to reconsider your options as housing market prices remain high. Hopefully, some of these tips may present some options to consider.
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