A five-year property-buying plan

September 27, 2017
property-buying
a-5-year-buying-plan

Do a budget

It may sound obvious, but McFall says you need to know what your surplus cashflow position is before you can create a realistic savings target.

“A budget can help you prioritise and define what is important to you, and help you identify and cut out those costs that are less of a priority. This will help you increase your saving capacity.”

McFall says a budget will also help you start to realistically know what level of borrowing you could service.

“While your bank or mortgage broker will look at your income and tell you how much you can borrow, this isn’t necessarily the same as what you can afford.

“Everyone runs their own personal economy based on their lifestyle, so what’s affordable is slightly different for everyone.”

Check out government incentives

These vary from state to state and can really give first-home buyers a boost. From first-home buyer grants and stamp duty discounts to grants for new builds, it’s definitely worth taking advantage of any available government incentives.

“It pays to keep your eye out for new incentives and changes to existing schemes. Over a five-year time frame, you need to keep your finger on the pulse around what’s available and when any grants or initiatives might be introduced or wound up.”

Where are your savings going?

McFall says those saving for a property purchase should be making their money work as hard as possible, without taking any undue risks.

“At a basic level, saving to enter the property market is about controlling the controllables and managing your risk where your control is limited.

“If possible, don’t just put your money into a simple bank account. Consider investing funds into investments which are likely to achieve a better return than cash in the time frame you have. Products such as fixed-interest managed funds are worth considering.

“Try to invest your savings somewhere with better-than-average growth, with enough time to ride out the bumps. See a financial planner, look at your options and discuss any potential risks before you make a decision.”

Determine your purchase intentions

Decide what your first purchase will be. Are you going to live in the property you buy or are you going to rent it out?

With the high cost of established, detached homes, particularly in capital-city markets, McFall says making your first purchase an investment could be beneficial, depending on your individual circumstances.

“An investment property may be a bit more affordable and may be achievable sooner. The cashflow gap could be smaller when you take into account the rental income and the fact that a lot of your expenses will be tax deductible.

“Often first-home buyers can’t afford their preferred type of property in the location they really want to live in. Buying something smaller could get you onto the property ladder sooner while you continue to rent in the area you really want to be in.”

Factor in the financials

It’s easy to get caught up in saving for the deposit, but McFall says first-home buyers need to remember there are many other costs associated with buying property, including stamp duty and legal fees, and you need to factor these into your overall savings target.

He also suggests doing your homework on loan products and planning your purchase in consultation with a financial planner or mortgage broker, who can provide sound advice on how to best structure your loan to meet your financial goals.

Getting a foot in the door of the property market is a goal shared by many young Australians. Financial experts say you can make it happen using careful financial planning with a focus on ‘controlling the controllables’.

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