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How to invest in your first home in 2021

Making logical choices for your first home can save you time and money in the long run!

Purchasing your first home will most likely be the biggest purchase of your life. This being said, it is vital that when planning for your first investment, you take the time to make well-planned and realistic decision. Your first home isn’t your forever home. As a first home buyer, it is important to know that the first home you buy, will unlikely be your last. Although it is a very exciting time, making logical choices now can save you time and money in the long run. Emotion-based decision making in some cases can hinder your positive return if not planned effectively. For instance, if you buy a car based on its paint colour, how are you sure it is fuel-efficient or that its servicing is affordable? The same goes for homebuying. Here are a few things to consider when transitioning from a renting to an owner, that will provide long-term investment benefits.

Market Research

The first step to a positive-geared investment is to research what location you’d like to own a home in. Although you may be set on your first home’s location, it is always recommended that your first home should be located in an area that’s predicted to grow. Growth doesn’t happen overnight. You should do thorough research to see the suburbs you prefer are within your price range and see how much growth occurred in the past 5 years, and if there is projected growth in the next 5 years. A great way to find these areas is to look ten to fifteen kilometres around central suburbs.

For example – Spring Mountain. The suburb is situated five kilometres from Springfield, one of the fastest growing regions in South East Queensland. Its growth was stimulated by the development of Springfield and now its surrounding suburbs are now next in line. An article released by the Ipswich City Council lists Redbank Plains and South Ripley as its next successors.

QPG Big Tip – You should think of property growth as a ripple – as one suburb grows, its surrounding suburbs begin to experience the same change 

Another great way to be educated on growth hotspots is by reaching out to field experts. By seeking appropriate advice from either a Property Consultant or Finance Broker, you can not only take advantage of their knowledge and experience to benefit your own homebuying journey, but be personally assisted to achieve your property goals.

Having support from an industry professional will assure that the decisions you are making for your first investment are driven by logic and have been made with a purpose. By thinking long-term in the first few stages of the homebuying process, you can feel confident that your decision will contribute to the positive growth of your property.

Equity

The second step to purchasing a home is to understand what you’re actually buying it for and the perks that come with it. Of course, the usual response is to provide somewhere comfortable for your family, but for many new first home buyers – especially those who purchased mid-pandemic in 2020 – changes in lifestyle and the property market were key influences that changed their thoughts on property.

The benefits of thoroughly researching the location of your first investment can result in equity. To put it simple, equity is where you own something of value. The benefits of equity are that once you have value in one asset, you can use that value to service for a second asset. The amount of equity used to purchase an asset is relative to the amount of debt. In other words, it is the difference between your property’s market value and the balance of your mortgage.

Equity is a valuable resource when it comes to property investment as it can be a long-term strategy for building wealth. A simplified example: If the market value of your home is $200,000 and you owe $150,000 on the mortgage, your equity would be $50,000, assuming you sell the property for market value.

Rental Appeal

The third step to finding the best property fit is to know your audience. When a first-time buyer buys a house, they should be thinking about their life in the home and if it is suitable for the next family that will live in it. It is important to think what would be appealing if the home becomes a rental property and what may be considered a deal breaker for future tenants.

A key factor that would make a home more appealing for tenants is the location. Future tenants want to know how close the home may be to public amenities, schools, universities and transport before committing to the house.

Take this time to think about the layout of your house. Is there something you would change if the price wasn’t stopping you? Is there something you regret not asking your builder to do when they built the home? Is there something unappealing about your home that may be a deal breaker for tenants?

If the home has 2 or more bedrooms but only 1 bathroom, it may be an automatic disinterest for some tenants. If you have a 2 bedroom apartment, it is more common for young singles or couples to occupy. If you have a 3+ bedroom house, it is more common for families to occupy. Our best advice would be to keep your options open from the very beginning to avoid missing out on future investment opportunities.

If you decide you want to turn your current home into an investment, there is no harm in interacting with local property managers! By contacting local property managers, you can get an indication of the rental appeal for the home and request a rental appraisal to see what the rent may be, at the time of the inspection, so you can plan accurately.

Making long-term investment decisions as a first-time buyer can be a tough experience so it is important that you seek advice when you need it most. If you’re interested in exploring your options within property investment, please contact QPG on 1300 248 514 to speak to one of our local Property Consultants about your homeownership goals.

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