First-time homebuyers often make numerous mistakes when purchasing their first property. Here are the top five mistakes first-time homebuyers should avoid.
Top 5 First Home Buyers Mistakes To Avoid
1. Thinking your first home has to be your “forever” home
Most first-time homebuyers believe that their first property will be their dream or forever home, and they search for a home to fall in love with. Unfortunately, in today’s market, their dream home is often not within their budget.
Some homebuyers choose to ‘wait and save’ until they can afford their dream home. However, they often find themselves unable to keep pace with the rapidly rising market, leading to a loss of hope and mounting frustration. They start believing that homeownership is out of their reach.
In contrast, other first-time homebuyers adopt a more proactive approach. They seize control of their situation and devise strategies to leverage the booming market to their advantage, rather than falling victim to it.
These buyers might settle for a property that isn’t their dream home, viewing it as a stepping stone towards their ultimate goal. This approach allows them to benefit from long-term capital growth in property value. By accumulating equity, they lay a foundation for future upgrades or the purchase of a second home. The objective is to build wealth through strategic investments, starting with an initial purchase that paves the way for further profitable ventures
2. Buying based on emotion and beauty
Many first-time homebuyers purchase a home when they “fall in love” with it, often captivated by certain features while overlooking practical considerations.
Therefore, don’t let the beauty of the interior mask potential issues with the house. Conduct thorough property and legal due diligence. Engage a solicitor or conveyancer before making an offer, and ensure they have reviewed your contract in advance. If you’re uncertain about selecting the best conveyancer, consider reading the blog post first for guidance.
Moreover, buying a house is a significant investment, and it should be approached with a balance of head and heart. While it’s easy to fall in love with many homes, ensure the financial aspects are viable.
Avoid choosing a house just to impress others; opt for one that suits your needs.
An aesthetically unappealing house with a strong foundation in a good neighborhood is often a wise investment. So what if it has outdated carpeting or an unsightly kitchen? That’s manageable. Purchase the home, budget for these updates, potentially saving at least $5,000 off your purchase price. Alternatively, do the work yourself over time, and you may sell at a profit if or when you decide to move.
You could also engage a trusted buyers agent to help you save costs and avoid costly mistakes.
In summary, you’re looking for the potential for healthy growth over the long term, wherever that may be.
3. Planning your purchase around government grants
Government grants for first home builders can be enticing, but it’s essential to consider the location and potential resale value. Often, these grants are available for properties in less established neighborhoods, which might lack infrastructure and amenities.
As a result, these areas may experience lower demand from buyers. Additionally, high supply levels in such suburbs can result in lower selling prices and rental returns if you decide to sell or rent out your property.
Building in areas where land may be released in the future can also increase supply and negatively affect property values. It’s crucial to weigh the benefits of the grant against the potential downsides of the location.
Being strategic and investing in established, high-growth suburbs can yield significantly higher capital growth compared to buying in developing areas. This increased capital growth can accelerate your path to purchasing your dream home.
Additionally, it’s worth noting that in many states, if you initially buy your first home as an investment property, you may still be eligible to access government grants when you later decide to become an owner-occupier. Be sure to check the specific conditions and requirements in your state.
4. Assuming you have to live in the first property you buy
If you can’t afford to buy a property in your ideal suburb right away, consider purchasing an investment property in an affordable area as soon as possible, instead of waiting and saving for years. You can use the income generated from this investment property to cover rent in the area where you wish to live.
This strategy, known as Rentvesting, has gained popularity in today’s real estate market. Essentially, the sooner you enter the property market and benefit from capital growth and cash flow, the faster you’ll be able to save for a deposit on your dream home.
5. Not looking at the big picture
Many first-time homebuyers who miss out on a house they really wanted end up purchasing the next available property out of desperation, often without conducting proper due diligence on the suburb or property.
In some cases, they choose to buy in remote, developing suburbs, areas that still lack essential amenities like schools, public transport, restaurants, medical centres, childcare facilities, recreational areas, parks, and more. However, these infrastructures and facilities play a significant role in your quality of life after moving to that suburb.
In other words, the goal is not merely to make a purchase; you should also consider your quality of life in that neighborhood. Even if you’re buying as an investment, consider the potential for good rental returns and capital growth in that suburb.
Be honest with yourself and ask these questions:
- How long will your commute be?
- Is it a pleasant and safe neighborhood?
- Are there shopping centers and public transport options nearby?
- Is it close to schools, playgrounds, and recreational facilities?
- Are there restaurants and cafes in the vicinity?
If you are satisfied with your answers, then it may be the right time to make your purchase.
Remember, Rome wasn’t built in a day, and your first property doesn’t have to be your forever home. You can plan to upgrade in a few years, benefiting from the capital growth of your property.
Therefore, have a long-term plan and strategy, and you may find yourself in your dream home sooner than you think.
What are your thoughts on this? Do you view your first home as your forever home, or do you see it as a stepping stone towards your dream house?
Good Luck
Amir Sehat
Disclaimer:
The information provided in this blog post is for general informational purposes only and is not intended as professional financial or real estate advice. While we strive to present accurate and up-to-date information, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained within the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
Real estate markets are complex, dynamic, and vary greatly by location and economic conditions. Therefore, it is crucial that you conduct thorough research and consult with qualified professionals, such as financial advisors, real estate agents, and legal experts, before making any property investment or purchasing decisions.
The opinions, thoughts, and viewpoints expressed in this blog are solely those of the author(s) and do not necessarily reflect the views of any affiliated organisations or partners. This blog should not be taken as a substitute for professional advice in your specific situation.
The author(s) and the blog are not responsible for any actions taken as a result of reading this blog. Readers should be aware that the real estate market is subject to risks and uncertainties and that past performance is not indicative of future results.
By using this blog, you agree to this disclaimer and its terms.