TIPS ON INVESTING IN YOUR FIRST PROPERTY

When deciding on investing in property for the first time, there a few key elements that investors should take into consideration, such as whether they are investment-ready and well informed on all the available options.

Purchasing a property is a major commitment that should be carefully evaluated regarding your life plans and financial situation both currently and in the future. As a first-time property investor, it is vital to be informed and ask the right questions, such as when, where, why and how to invest in your first property.

Here are some guidelines to help find the answers to these questions:

WHEN

The short answer is as soon as you can afford to. While it is important to watch the market and buy at the right time, it is never too early to get into the property market. Property investors should take the necessary time required to ensure that they make an educated decision, assessing whether they can afford to make the necessary financial commitments.  To accurately assess this, it is advisable to use the resources available, for example, banks and bond originators will be able to give purchasers estimated repayment figures based on bond requirements. Monthly bond repayments should not exceed more than 30% of the buyer’s total expenses, and most buyers will be required to put down a deposit of between 10% and 30% of the purchase price of the property.

Keep in mind that it is not just the bond repayments that will need to be paid. There are some other costs involved in a property transaction that can add up to a substantial amount. These fees include transfer duties, deed office fees and levies, municipal rates, bank charges, bond initiation fees, home insurance costs, the monthly administration fee charged by the bank, moving costs and the cost of maintaining the property.  It is essential to include these aspects into the calculation when assessing affordability.

WHERE

Location is vital because being in the right area and position will ensure a good resale value and return on your investment.  When looking into an area, consider proximity to amenities such as schools and shopping centres.  Online property search portals can be used to find statistics on areas and values of property. Estate agents can provide you with a comparative market analysis, which will give you a thorough knowledge of the property sales dynamics of a certain area. 

WHY

Property remains a solid asset class in which to invest. Buying property is a huge step towards financial security and growth and is a great way to invest in your future. It less volatile than the equity or share markets and, unlike other investment options, with property investors have complete control over their asset. Property prices tend to increase fairly consistently over time, which makes it a lot easier to gauge the estimated return on investment much more accurately than any other investment class. 

Another beauty about property is that it is the only asset class that can be financed and leveraged. In layman’s terms, this means that you can buy property with someone else’s money. If an investor can prove affordability and meet the loan repayment conditions, property is practically the only investment option that banks are willing to finance.

HOW

Save, save, save. Wherever possible put aside as much money as you can. The larger the deposit, the lower the repayments and the easier it is to buy a property. It is also vital to have as much disposable income as possible, as this will have a bearing on whether the bond is approved or not. Pay off any existing debt as soon as possible to improve your disposable income ratio and credit rating. Maintaining a clean credit record will be invaluable when being assessed for bond approval.

Once you have the required deposit and have decided on the type of property that will suit your life stage, working with a mortgage originator will ensure that the bond application is a smooth, hassle free process.