Every property investment journey starts with saving for a deposit. This is often the most challenging step for most aspiring homeowners and investors, with many taking several years to build sufficient funding. But through hard work, commitment, and financial discipline, many of them are also able to overcome this obstacle, opening the path to their dream home or investment property.
Most lenders in Australia require borrowers to make a deposit equal to 20% of the property’s price to be able to secure a home loan without having to pay lender’s mortgage insurance (LMI). Borrowers can also apply for a loan with a lower amount, but having bigger deposit often indicates that borrowers can manage their finances well, minimising the lender’s risks and increasing their chances of getting a home loan approved.
Lloyd Edge (pictured), director and founder of buyer’s agency Aus Property Professionals and author of a book titled Positively Geared, offers practical advice on what do to next after saving enough for a 20% deposit. Here are his tips:
1. Find a trustworthy mortgage broker.
“The first point of call is to speak to a qualified mortgage broker,” says Edge. “This is even BEFORE you start to look at properties available for sale.”
He says a mortgage broker can help secure a pre-approval, giving home buyers an idea of how much they can borrow.
“Without knowing what your borrowing capacity is, you may be wasting a lot of time looking at properties that are outside of your budget,” he says.
2. For investors, look for a qualified buyer’s agent.
For those looking to purchase an investment property, Edge’s advice is to speak to a qualified and experienced buyer’s agent.
“They have a wealth of knowledge, which you will be able to tap into, and they will be able to give you advice on where is the best place to invest your money for your individual circumstances,” he says. “Buyer’s agents aren’t restricted to just investment purchases either. If you’re looking to buy your home they will be able to save you a tonne of time by searching the areas you’re interested in, get you access to those off-market properties, and they will attend the open homes on your behalf.”
Edge adds that having an agent can also help buyers save thousands of dollars by negotiating on the purchase price on their behalf and preventing them from falling for “those clever real estate sales tactics.”
3. Do research on the locations you want to buy in.
Edge says it is crucial for buyers to understand what they will be able to afford with their money in particular locations.
“If you’re willing to do the hard yards yourself without employing the help of an expert, once you have your pre-approval and understand your borrowing capacity, you should definitely start to research the areas you want to buy in,” he says.
4. Make a list of your must-haves and the things you can’t give up.
Edge says it is important that buyers know which attributes of a property they consider “must-haves” and which ones they are willing to compromise on.
“If you have a solid wish list on hand and you understand the market you’re buying in, this will be invaluable when you begin to search and inspect properties,” he says. “Once you’ve done your thorough research, straight away you should be able to get a grasp on what the property should be worth, and whether the property will suit your needs.”
5. Stick to your original plan.
“When searching for a property, it is common for first-time buyers to suffer from ‘analysis paralysis’,” Edge says. “Where there are too many options and choices, they begin to analyse everything too much and end up getting really confused when comparing properties.”
He says this is where decisiveness and the ability to stick to then original plan are vital, adding that having a shortlist of the properties that only fits their criteria can be very helpful.
6. Get expert legal advice.
Purchasing property involves a lot of complex paperwork that requires expert legal advice, says Edge.
“Once you have found your property, you will need to engage a conveyancer/lawyer who will review and handle the contracts for you,” he says.
7. Perform building and pest inspections.
Edge says getting a building and pest inspection completed is “highly advised” before putting an offer on a property as this ensures that “there are no nasty surprises hidden underneath the surface that you might have missed.”
8. Don’t lowball on your offer.
Edge says it is never advisable to give a very low offer as “you may not be taken seriously by the seller and the property may go to a buyer that is considered more serious before you even get the chance to put your best offer on the table.”
He says armed with their research on the area, buyers should be able to put in a reasonable offer for a property.
9. Work closely with “your team.”
“Once your offer has been accepted, your conveyancer will help you with the exchange of contracts through to settlement, whilst your mortgage broker gets the ball rolling on your finance with your lender,” Edge says.
He adds that working closely with “your team” ensures that the settlement runs smoothly, and buyers can own their chosen property a lot faster.