Ways to Enter the Property Market

Entering the property market in 2024 may seem unattainable, but with a couple of sensible moves you may be able to own your own home faster than you ever thought possible.

We give some handy advice on what our clients do to buy property.

Family Support

Many first time buyers are unaware of the option of using a guarantor to help get into their first home. If a deposit is the main thing holding you back it may be a beneficial option.

What are the benefits? Family guarantors use the equity in their home to offset a small portion of a family-member’s purchase deposit.

Mortgage lenders that accept a family guarantee are often able to reduce the deposit you are required to supply as your family member’s asset provides collateral.

So who can go guarantor? A parent, step-parent or guardian are generally the only members of your family that most banks accept as a guarantor. Other family members, such as siblings, or a close friend are typically intelligible

What do they need to go guarantor? The location your family member currently resides often isn’t an obstacle, however they must own at least one property holding in Australia to be used as a guarantee for your loan

What are the risks? Although a guarantor many seem like a great way to get into the market, it’s vital that you don’t overcapitalize on your purchase. All repayments are expected of the house owner and not the guarantor.

If you fail to make your repayments and the house goes into foreclosure your family’s home may also be sold to finance any losses the bank or financial institution incur

If it’s right for you, what should you do? The first thing you should do as the purchaser is to find out whether your lender accepts family guarantees and the specific requirements that would be imposed if they do.

Before moving forward, it is advisable for your family member, or members, to seek independent legal advice to ensure they are aware of their commitment and legal obligations.

Buy An Investment Property First

If owning a home to live in appears too restrictive or impractical, our buyer’s agents recommend owning an investment property may be the right move to get started in the property market.

There are numerous reasons why owning an investment property may be a more sensible option to purchasing a house to live in. If you’re living with family or cannot afford to buy in the area you want to live in, purchasing an investment property may get you into the market without interfering with your current living situation.

What are the benefits? Owning an investment property has the capacity to increase taxation benefits and create a nest egg to finance future property aspirations.

Holding onto a property for a few years could generate a good return, and if organized well, tenants may predominantly fund the investment.

What are the risks? Like any investment, the return you receive relies on many factors. Before entering the investment market it is essential you understand your legal and financial obligations, as well as purchase a property that has the best opportunity for financial success.

If it’s right for you, what should you do? When advising clients, our lead buyers agent Mark Ribarsky suggests three key factors you should consider before purchasing an investment property:

Budget: develop a firm budget that considers the price of a potential property, funding any current or future improvements and regular obligations, such as rates and real estate fees

Market strategy: research the current rental market in your chosen area to determine occupancy statistics and rental returns

Long Term Financing: create a plan for your investment that considers how you would fund the investment if the property remained unoccupied for a period of time and how long you intend to hold the property.

Prepare to Own Without Owning

If purchasing a property just isn’t in the cards in the immediate future, you can start working towards getting into the market through patience and planning. What is involved?

Successful investors often comment that the first step is one of the hardest stages of climbing the property ladder. If funding a deposit or affording a particular area is unattainable at the moment, start saving your pennies the same way you would if you did own a property

Researching is free and a valuable asset. Investigating the financial commitments of owning a property compared with your current position clarifies what will be expected down the track.

Using this time to place the financial difference into a high-interest savings account or other form of investment will help work towards your goal so you can own a property sooner.

What are the risks? Adding to a savings account holds very few risks as long as you are committed to not spending the money saved.

Other investments hold greater risks, but often offer higher returns. Once you decide on the form of investment best suited to your life-style and commitments consider the individual risks involved to make an informed decision.

Getting around the excuses of not buying a house

Our buyers agents hear heaps of reasons why people don’t get into the property market. It’s better to jump in the deep end and earn the benefits of own a house rather than spending your free time window shopping, here are a few ways to get around the most common excuses.

Procrastinating – ‘Don’t kid yourself, ‘We’ll do it later’ never happens. Have the right frame of mind, you need to invest early. Talk to friends that have bought property for their tips. Hire a buyer’s agent to do all the hard work for you.

Can’t save enough money – Learn good spending habits in your personal day to day, you can save money quite simply.  Remember, these are the important years of your life where you have a chance to either set yourself up financially or do nothing and then live to regret it later.  It’s the things that you don’t buy that make the difference.

Believing Share trading can make more money than Real Estate? The best money making strategies never have the glitz and glamor and is usually the most boring. It involves buying good quality assets and repeating the process. It’s no get rich quick scheme! Fast money doesn’t work.

Short term thinking – It’s often said property doubles every seven to ten years. The young investor needs to have a long term focus, a 10 year minimum. Be patient and wait for time to do its thing.

Afraid of the risk – The average house price in Melbourne in 1980 was $39K fast forwards to 2014 and the average is around $570K.  Young investors have time on their side so they can take a risk to leverage good market conditions. Have a plan B to minimise risk if your circumstances change.

Why Property is a Safe Investment

The amount of control that you have on your investment

The amount of control you have over a property is quite vast, as there are a number of ways to grow the income and the value of your property.

You also have the option of choosing; where you buy, how you buy, when to sell, when to buy, and so much more.

While economic factors may affect the value of the property in the short term, factors such as news, media releases and annual reports will affect investments likes shares a lot more.

Property is a secure investment

Investments like shares can be a huge risk, however investing in property will offer you a more secure investment, that will ensure you earn money from your investment.

For example, if we were to invest $200,000 into the ASX share market there is no guarantee that you will earn money, or even maintain your current position. You may lose 50% of your investment over a few years, bringing it down to $100,000.

However, if you were to invest the $200,000 in property you are more likely to make some sort of gain from your investment. For example, if you were to purchase two units for $200,000 each, with a $100,000 deposit on each unit, you will have a property portfolio worth $400,000 and $200,000 in mortgages.

If you are able to collect enough rent from each of the properties, then the rental income can be used to pay off your mortgage without having to use any extra money.

Investing in property is easy then we may think

Even though there is a number of paperwork that must be produced and filled out, investing in property is still a simple process.

As long as the process may be, there aren’t any complicated processes, the only thing you need is to sort out your finances, and you are on the way to purchasing a property.

If you still think the process is too complicated, then consider hiring the services of a buyer’s agent who can assist you through the entire process of securing a property, which involves; accurate market appraisal of a property, inspection of the property, undertaking all the paperwork, attending auction and staying in regular contact with the buyer.

Others paying of your Mortgage

A huge benefit of investing in property is that if you purchase the right property at the right price, you may not have to pay a single cent towards your mortgage. If you have reliable tenants that pay rent on a regular basis, then they will pay off your mortgage, and you do not have to think about it at all. You have the pleasure of sitting back and enjoying your property increase in value.

Investment properties are reliable

Unlike other investments, property is considered to be one of the safest investments in Australia. If you have a property that is new and has been maintained properly, then you can look into the future and have a rough idea of where your property will stand, (24 months) if market conditions stay the same. While investment in shares could dramatically change, thus resulting in a potential decrease of your investment.

Tax benefits of your investment

By investing your money in property, it can provide a wide range of benefits when it comes to tax. This is because there is a range of tax deductible expenses that can be claimed on your investment property, which means more money in your pocket. However, you need to consider hiring an accountant, as they can assist you in cutting your tax by thousands, even tens of thousands of dollars.