Tempted to go back in to real estate? Here are 5 questions you need to ask yourself before jumping on the investment bandwagon.
Can I afford to put down a 20% deposit?
Gone are the days where it is cheap and easy to borrow 100% of a home’s value. The financial crisis has forced banks to tighten their credit policies and be selective who they give their money to. That is why if you are testing if you can afford a loan and if you are financially ready to pay a monthly mortgage, see if you can afford to pay 20% of the principal amount.
Who can I turn to for money?
Buying any investment property in Australia is easy if you have your finances ready. For one thing, it gives you great negotiating power, giving you enormous opportunity to squeeze a better price. For another, it gives you freedom to buy that dream home once you’ve found it or stumbled upon it, giving you great advantage against competing buyers.
Do I know what I want?
Knowing what type of house you want, what location and what price you can afford to pay will not only save you time but also money. So do your homework, check out the property for sale in Australia, get any data available about the investment property you want, the recent sales in a particular area, and the changes in the local demographic.
Can I trust my income?
Buying a house with a mortgage can be a big financial responsibility. You will have to take away a portion of your monthly income for payment to lenders. This can throw your budget out of balance if you don’t have a reliable source of income that can cover this additional expense. And of course, you must have an adequate safety net for emergencies such injury, pregnancy, theft and the like.
Am I ready to settle down for at least 5 years?
Renting gives you flexibility to move out at a short notice. Ownership doesn’t. It may take 5 years to 7 years before you can recover from the purchase cost. So be prepared to settle down for at least five years.