Should I Buy A Property?

You’ve probably heard of the Australian Dream - a detached home on a quarter-acre block with a hills house in the back and a barbeque. But with property at their most expensive in 31 years, getting financially prepared for home ownership has become more of a commitment than ever.

So in the face of all of this, it’s worth asking yourself: “Should I buy a property?”. In order to ask that question, we reckon you should have a think about these questions too:

Why are you buying the property in the first place?

One of the most important things to ask yourself when you’re thinking about property is why you’re planning on buying your first property.
Some people are just happy with a place to live in that they can call their own, which is where you become what’s called an owner-occupier.

This is more likely to be a bit more of a long-term investment, where you’d be looking to sell the property a fair way down the line, if at all. In that case, are you fairly sure that you’ll be happy with where you’re living for the years to come?

Other people are looking to use it as an investment opportunity, selling or ‘flipping’ the property within a few years once it has increased in value in order to afford a better place or borrow money for even more properties.

The risk with this approach is that property prices might not go the way you’d hoped, and you could end up on the hook for a property that is worth less than the amount you borrowed it for (also known as negative equity).

There’s also a fairly new term called ‘rentvesting’, where you buy a property to rent out to other people, while you yourself rent a place to live in. Similar to the investment approach, it requires a bit of planning to make sure you’re able to pay your rent, handle your mortgage, and as make sure you’re covering the costs of being a landlord.

Whatever your reason for wanting to buy a property, there’s the potential for risk and for reward, and different ownership strategies suit different situations.

Are you confident you can repay the loan?

This may seem a little obvious, but unless you’re really loaded, you’re going to need a home loan in order to buy your property (also known as a mortgage). Much like other loans, you’ll be charged interest on that loan based on the interest rate you’ve agreed to with the bank or lender, and you’ll need to pay off the principal (the amount you agreed to loan) at some point as well.

If you don’t make the required minimum payments on your mortgage, you could end up defaulting on your loan, having the home taken from you by the lender, or putting you in a position where you have to declare bankruptcy - which can all lead to serious future consequences.

This isn’t to get all spooky about it - part of the lender’s job when approving you for a loan is to take a look at your ability to pay it off - but you should think about how resilient your income and savings are if something were to happen. This is where other savings strategies like emergency funds come into play.

Do you have money on top to maintain your property?

We’re often so obsessed with mortgages and lender’s prices that we don’t stop to think about some of the other costs involved with property ownership. Whether you’re living in your place or renting it out, you’ll need to make sure you take care of the place, including maintenance work, council fees, strata payments and other ongoing costs.

If you want to make changes to the place, you might need some money set aside for renovations as well. While you can ‘top up’ certain kinds of home loans, you’ll still need to pay that money back.

With all that being said and done, planning to buy a property is still a really exciting life moment, with loads to learn and experience along the way. If you’re looking for a little more info about what actually goes into buying property, plus tips for saving up for big costs (like a deposit perhaps?) make sure you check out our Academy FinLit. We teamed up with our mates at Westpac to break down all the money stuff you didn’t learn in school. Check it out over here!

The following content has been created by Year13 in conjunction with Westpac as part of a paid partnership. The information is general advice only, does not take into account your personal circumstances and you should do your own research and seek advice before acting on this content.