Breaking the rent cycle and owning your own home can be a rewarding achievement. Let’s face it, rent money can be seen as dead money. However, it’s important to know your market, keep to your budget and do your research so you don’t buy the wrong property, and end up back where you started.
A few key benefits to buying over renting
There are a number of reasons why it might be preferable to buy rather than rent, depending on your circumstances.
- Freedom: Although living in your parent’s spare room may be a great saving, owning your own home provides a newfound sense of freedom. No more landlord and no more shared spaces, you can live how you want and decorate how you like.
- An investment: What you would normally pay on rent is instead paying down your mortgage. Although property prices can vary, the value of a house will likely increase over the long term, depending upon the area. The equity you build up also makes for a valuable asset, and can lead to opportunity for greater wealth in the future, by helping you buy an investment property for example.
- Renovation potential: Home owners have an abundance of choice over how they can renovate their home or garden, while rentals are often restricted in what can be altered. A coat of paint or new carpet can do wonders for a property's appeal and value. Additions to a property can also add value.
- Cost: Record low interest rates mean owning a property is now a little more affordable. In some cases, depending on location, it can even be similar to the cost of renting. Many banks also have loans that require only a five per cent deposit, which can help you get into the property market sooner rather than later.
Considerations when buying a property
Buying a home is the biggest investment you’re likely to make over your lifetime, so it’s important to do your homework.
- Know the market: Look for areas where there’s still room to grow. Ask yourself (and an expert in the local market) if the property shows future growth potential based on the surrounding suburbs. What you should pay for a house can be determined by analysing comparable sales in the area, and recent market movements. Ensure you keep up-to-date with what’s happening, and attend local inspections and auctions for a good indication of property prices and what’s available.
- Keep to your budget: When setting your budget, remember to factor in the cost of maintenance and other ongoing expenses. If you’re used to renting, it might not occur to you that you’ll need to pay council and water rates, for example. Once you have worked out what you can afford to spend on a property, stick to it. Don’t lose your head in the heat of an auction, and don’t look at properties that you know are well outside your price range, even if you really, really like the pictures online. Keep in mind too that it is possible to bargain on price, under certain circumstances, for example if major work needs to be done. It’s important to remain realistic though – while bargaining can get you a discount, some sellers may not be willing to budge.
- Research: If you’ve found a property you like, it’s important to check it out thoroughly. This means doing your homework on the area in a number of different ways. Is it flood or fire prone for example? What’s the zoning? Many municipalities are under pressure to ease zoning restrictions, which could lead to a potential development opportunity, or mean you end up surrounded by high rises! It’s vital to get a building inspector in Melbourne (or anywhere else you’re purchasing property) to check it over. You don’t want any nasty surprises, and if there are major works to be done, you’ll want to know about it in order to secure that discount on the purchase price. It’s also a good idea to have a wander around and get a sense of the neighbourhood – you wouldn’t want to move in only to find the next door neighbour had been bribed to keep the trash rock off on inspection day!
Now you’re equipped with some tools to help you break the rental cycle. Remember to do your research, and you’ll be well on the way to making the right decision. While renting can often seem easier, with less responsibility involved, there’s nothing like owning your own home!
By Darel McBride
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