For many that are new to the real estate market, the finer points of investment can still appear quite mysterious, and that makes a lot of sense. After all, when you are constantly being told how difficult it will be to get that first foot on the proverbial ladder, you’re unlikely to be thinking that many steps ahead as to wonder how you can get more about it. This sometimes leads to younger buyers, who haven’t had the time and experience to fully embrace these finer points and subtleties, making decisions with their new purchases that may not be ideal for their future growth.
For this article, we’re going to try to provide some clarification on that process, and hopefully, give those of you that are thinking of buying your first property and becoming homeowners yourselves a bit more context on what that’s likely to look like. It won’t be an exhaustive guide, as we’ve covered many of these relevant topics in our monthly property management blog, and to just go over them again would be relatively redundant. So, let’s ditch the preamble and start talking about how you can take that first step.
There are many reasons that real estate is considered such a desirable investment across the globe. For those that are looking for a level of safety and security, it offers the promise that you will always have a house that is yours if required. If you’re looking to rent it out, property also offers a very reliable income that isn’t possible with most other forms of investment, which can also be used to help you pay off any regular fees, such as a mortgage on a loan, that will come with its ownership.
On a more granular level, a property’s equity will also increase as you pay it off. Not only that but if the value of the property increases over time, so too does its equity. This can be hugely valuable if you require leverage for other large investments that may require a loan. This isn’t to say that property is always going to be a sure thing, however, and it’s important to understand that there is a risk of losses with any large investment.
Property prices fluctuate, and while they are historically on the rise in Australia, a dip of even a few per cent in the median selling price of any given area or property type can end up potentially costing investors a lot of money. Not only that, but it also comes with the requirement of mortgage repayments if you require an initial loan, which most of us will, it is required that you are able to pay that off consistently in the long term. So, real estate is a good investment, but it’s important to know the potential risks that can occur prior to making a decision.
If we’re taking Melbourne as an example, the median house price as of December 2021 was $1.1mil. Considering the fact that lenders will generally ask for a 10%-20% deposit for any home loans, this would mean that a deposit of around $110,000 to $220,000 would be required to comfortably acquire a property. On top of this, there will be some upfront cash requirements, such as stamp duty, insurance, conveyancing fees and interest on borrowing.
Obviously, all of this can be quite overwhelming for someone trying to get their first property, but what I’ve just described isn’t entirely accurate to the first homebuyer’s experience. Firstly, this median price is one that spans across the entirety of Melbourne, meaning there will be areas that are more expensive, but also ones that are more affordable to new buyers. Officer, a suburb in Melbourne’s south-east, has a median price of $603,750, with a lower price for units. Meanwhile, if you’re looking for something a little closer to the CBD, Carlton’s median unit price is a surprisingly reasonable $487,500. Plus, as a first-timer, you will likely be eligible for the First Home Owner’s Grant, which should offset a lot of the initial expense.
Buying your first property is going to feel like one of the most important steps in your financial life, and it’s one that you’re going to likely be with for some time. Nevertheless, every journey starts with a single step, and for those that are willing to take it, there’s a lot to be excited about.
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