We Bought A House! (Final Part: The Lessons) And Bye Bye 2020!

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Sigh, finally it’s come to this.

The end of what has been a most interesting year, to say the LEAST.

Bye Bye 2020!

We had huge expectations to spend tonight with friends and family – but as is often the case this year, lockdowns have reared its ugly head again which meant a more muted celebration is in order.

Stay safe people!

As I sit at home sipping my freshly chilled coconut water, I had wanted to write a summary post for the year, but guess that will wait till next time.

Because as promised, today’s post is a wrap up of what I learnt in our home buying journey, the previous ones you can read (here, here and here).

“Takes deep breath”.

So here goes…

Mentally Ready

Many people say they want to buy a property, but not many people are willing to do the work involved to buy a property.

Understand that buying a property is probably going to be one of the most mentally draining things you’ll do.

From weekend inspections, to negotiating an offer, to being pipped multiple times – it’s just how it is with buying property in Australia (and Sydney in particular).

But the biggest challenge is time. Honestly, expect at least a dozen or so weekends spent driving around inspecting properties – with further time required to research them.

Research, Research, Research

Ever heard of location, location, location?

Nah, the most repeated words should be research, research, research.

Because nothing can beat it.

I’m not talking about where the shops and schools are, or how many k’s your house is to the nearest CBD – you can find that out in a few clicks.

You need to dig deeper.

For example, even though the median house price in our suburb is $1.665m, the median 5 bedder stands at $1.88m.

This meant that if we could find something around the median price (and well below the 5 bedder median), there should be reasonable demand for our property if and when we decide to sell.

On The Ground

However, no amount of research can actually beat inspecting the properties themselves.

You’d be surprised at the difference in values between the high side of the street vs low side, or which way the land faces, or how much premium a nicely landscaped backyard charges.

All of this you can only obtain from intel via on the ground research.

This is the only true way to assess comparable value in my opinion.

Land Value

Speaking of value, we’ve often heard the oft quoted expression: “land appreciates, buildings depreciate”.

But how do you determine land value?

Well, luckily for us – the state governments provide a handy tool regarding what the land value of a property is.

I live in New South Wales, so the NSW one is here.

My general rule of thumb is to buy where the land value makes up over 50% of the purchase price, because hey, apparently land appreciates and buildings depreciate…

Editor’s Note: the government’s website is only their determination of value, this differs from what the market will pay.

Be (Finance) Ready

This is a huge consideration for both buyers and sellers. Unless you are buying with cash, you’ll need a loan.

So make sure you have a pre-approval, or in our case – a very strong indication of what our borrowing capacity is.

This is because without solid numbers, you are peeing in the wind (unfortunate).

It’s also important to remember that just because a lender will lend you a certain amount, doesn’t mean you need to go up to this amount – always try to have a buffer in place, otherwise it’s just financially reckless to max your credit limits.

Easy Conditions

As I mentioned in the previous post about our offer, we weren’t the highest by a long way.

However what made us successful, besides a healthy dose of luck – is our conditions were simple, clean and easy:

• Finance.
• Building + Pest

That’s it.

I say luck because, as previous renters – we didn’t have too much baggage (pun intended) coming into this transaction.

The other offers, although higher, wanted a combination of longer settlement timeframes, or having to sell their house first, or wanted their relatives (stuck overseas) come have a look.

Always Have Building + Pest

And as I’ve also mentioned in the previous post, we were able to cut down another $20,000 off the purchase price come settlement because the building and pest inspection found some hidden items which we weren’t aware of.

Although a good negotiating tool, to be honest I always ask for a professional opinion on every property I buy because heck, I’m not a builder nor am I a pest controller… I’m a numbers guy.

I’d want to have a second opinion to see if there’s anything I’ve missed.

Actually… for this one, we got two building and pest inspections – just so we were doubly sure (and they still missed on some items).

A very good friend of mine incidentally settled on the same day as ours without a building and pest inspection… and found well… issues.

“We got sold a dud property. The owners / agent covered it up very well. Great con job”.

Sigh, why not spend the pennies to save the dollars.

Act Decisively

Lastly, it’s important to remember that there’s no such thing as the perfect property.

If something comes along that ticks most of the boxes – just act, don’t think.

If you truly want to get in, then get in.

Don’t wait around in the hope that prices will tumble.

It is my sole opinion that housing values is THE bastion of wealth for Australian households – politically and economically the housing market is too big to fail (or rather, the very last pillar to fall).

So if the game is rigged for homeowners, don’t fight ’em, join ’em.

Start small and just go from there.

~~~

Wow what a whirlwind few weeks it’s been, from what’s probably been one of the most transformative years of my life.

I think all of us will remember 2020 for many reasons, for better or for worse.

But y’know what?

This year is the first year of the new decade, there’s 9 more years to go – so come on, let’s all make this decade one of the best ever!

And I’ll leave it here because it’s time to spend the last few moments of this year with those whom I care about the most.

Wishing you all a SAFE AND HAPPY NEW YEAR!

See you in 2021!!!

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