Property is an investment that cannot be taken lightly – regardless of whether you are a first-time home buyer or a highly experienced investor, buying property is a serious step. We all experienced what happens when property investments are taken lightly, and the lessons learned from the 2009 property implosion and resulting economic recession are lasting.
This does not mean, however, that you should avoid investing in property at all costs. Rather, it is important to do your research ahead of time (otherwise known as due diligence for those who are investing on a large scale), prepare yourself for what lies ahead, and face it with courage and flexibility.
Every property sale is going to be unique due to many different factors such as the specific traits of the property itself, the buyer, the global, provincial, and local economy, and the contract terms.
However, regardless of the differences of every property, there are a number of aspects to take note of prior to a sale. Below are the four most important things to make a note of before taking your first step (or second, third, or fifty-first…) on the property ladder. Let’s take a look.
Doing Your Due Diligence
When considering buying property, it is essential that you do as much research as you can before making such a big investment. This means doing your best to understand as much as you can about the local, national, and global property market and economy.
High-level research like this may seem like overkill at times, but it is a good idea to have a sense of when the economy is shrinking and expanding.
It does not mean that you need to have a degree in economics or start doing an intense level of research. Instead, it is important to be able to answer questions such as what is GDP, what are the local market indicators, what the housing market looks like in my neighborhood (and city, county, province, country, etc.), and what are the forecasts for the market.
Take Another Look at The Ten Key Features
There are ten important features for every piece of property that is worth noting and comparing with local properties. These are location, age of the house or building, seller’s incentive, the maintenance involved, layout, appliances, square feet, the number of bedrooms, as well as the number of bathrooms.
Some of these features will not apply if you are buying a commercial property, but they are all incredibly important for residential purchases. Although you will likely not want to think about it when buying your home, resale value is incredibly important – these ten features are all about resale value.
Resale value is likely one of the last things you want to think about when you are in the process of buying a house. Buying a house is already stressful enough without thinking about one day having to sell it or buy another house. However, the reality of the realty market is that you need to think about resale value, whether you want to or not.
The ten key features listed above are all important to determining resale value, but there are also a number of smaller, more surprising details you may want to familiarise yourself with prior to buying a home. For example, one such smaller detail is whether or not the home has a bathtub. More people are likely to buy a home with a bathtub because they will want a tub for bathing their children and thus, the resale value increases.
The Golden Ratio
Another important factor to make a note of is the golden ratio – this is your debt-to-income ratio. Mortgage lenders use the debt-to-income ratio to determine whether or not you would be a good candidate for a loan. Good candidates are able to handle the financial burden of a big (house-sized) loan and have a healthy ratio of monthly debt to income.
The way the housing market is right now in many countries around the world, a significant number of renters are actually paying higher rental rates than they would pay for a mortgage. While symptomatic of larger, systematic issues, high rental rates mean that young people have become better at monthly budgeting than previous generations.
Buying property often introduces frustrating, unexpected costs and property owners with good monthly budgeting skills are going to be more likely to be able to meet those needs in addition to mortgage payments. Budgeting is a skill, but it is one that you can develop through practice and effort.
Turning Inward
This is also a good time to consider how secure your own financial position is. Depending on the property you are investing in, you may be paying off the mortgage for decades. It follows that job security would be a major, pressing concern.
While it may seem hard to believe, another important aspect of buying property is looking inwards and taking a moment to reflect. The emotional state of the buyer is incredibly important because it can change the decision-making process.
If you are feeling overwhelmed, pressured, or like you are being trapped, then it is likely not the right time to buy. Unfortunately, many people buy property because they feel that buying a home at a particular age is something that they need to do or that it is expected of them. In today’s volatile market, buying property is an increasingly risky investment and no one should be pressured into buying property they are not sure that they want.
On the other hand, if you are feeling excited by the prospect of making an investment and ready to take on the challenges and responsibilities that come with having something that is truly yours, then property ownership is the right path for you. Good luck on your property journey, and remember the same tips when you resell or buy your next piece of property.
