Buying your first property can be a daunting excise that should not be taken lightly. At the same time, this can be one of the most rewarding experiences in your whole life’s experience. It is very important to consider a few things before committing yourself to such a decision. In this article, I hope to address the questions you need to ask yourself and carefully think about the answers before committing yourself to the purchase.
1. Why do you want to buy your own property?
There are many reasons why you would want to invest in your own property. This can be for investment purpose (buy to sell, buy to let), for you to dwell in or for your business to use as storage or office space. Whatever the reason is, you need to consider the financing strategy and how it will have an impact on your cash flow in the long run.
It is important to understand that not all property transactions are investments in nature, as it is always perceived but it can also constitute a financial liability.
2. How are you financing your property?
There are different ways of financing your property depending on the reason for your purchase. For your primary residence and investment purpose a home loan would be ideal. Other options includes rent to purchase financing.
For business purchases equity partnership might be ideal to finance the investment, however the numbers have to make sense to convince the investors to invest in your deal.
3. Are you getting the best value for money?
Property should always be seen as an investment or for that reason you should always strive to get the best deals for your purchase. Ask yourself what are you paying for, and if the selling price is justifiable. Just because the seller has placed an asking amount on the property does not mean that’s the best value for you.
Do a little bit of homework? Seek advice and consult with an evaluator to determine the value of the property. At First One X, we have a team of property experts who will assist you in conducting the valuation of the property you are purchasing and justifying the price you should offer to the seller.
4. What is your exit strategy?
Do you have contingencies in place when you have to surrender the commitment? In 2020 the world came to a standstill due to the COVID 19 pandemic. This resulting in many loss of jobs and people placed in a position where they could not afford their properties. At the same time, your might need to relocate to a new city and your primary, do you have a plan in place for your property?
It is important to have many scenarios upfront as exit strategies should you find yourself in a position where you need to exit your investment. How quickly can you exit?
5. Find out why is the seller selling their property
There are many reasons why one would sell their property, find out why are their selling and evaluate their reasoning. It would be advisable to seek out if their reasoning for selling is as a reason of challenges they faced with the property you will inherit when purchasing the property.
6. Have you considered your affordability?
Can you afford the property in the long run? A home loan commitment is one that will stick with you for up to 20 years. This means a certain amount will be deducted from your salary for a period of 20 years. Take into consideration all your expenses in the long run, if you still need to further your studies or purchase a car, the amount you are committing to pay back your bond might have an impact on your financial decisions.
You might need to save up to put upfront a huge deposit to reduce your bond amount.
Take into considerations, taxes and rates associated with owning a property and if buying in a complex consider the levies that need to be paise to the body corporate on a monthly basis. Remember converting your property into cash will take some time, and in case you find yourself desperately needing to sell this will result in you losing on the maximum valuation of the property, due to desperation.
7. How is the neighbourhood?
Consider the neighbourhood in which you are purchasing your property, what are the local municipality plans in the near future and will those plans affect your investment in any way be it positive or negative.