As a newcomer to the real estate market, you will realize there are many caveats to successfully buying your first property and that reading the fine print often requires professional assistance and experience. If you are baffled by the complexities, here are several things to bear in mind when buying your first property.
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Your Personal Economic Well-Being
Carefully weighing the economic factors is an essential part of any investment and especially so for larger ones like buying a house or any other kind of property. Consider first the state of your personal finances. If you are having to run yourself into heavy debt to make a purchase or to register for a mortgage, you are probably not making a decision that is prudent for the long term.
At the same time ‘putting all your eggs in one basket’ by investing all your savings into one property is also rarely sensible. Schedule a session with a financial advisor or manager to assess the type of property you can safely buy without plunging yourself into financial trouble or excessive debt.
The State Of The Economy
As any market expert will tell you, there are periods of time in which it is simply more lucrative to invest in real estate. This may not be the case all the time however as the real estate market is prone to slumps and downturns. Gathering information from real estate market research specialists can be invaluable in making sensible decisions at the right time.
System of Payment And Turnover
When you begin the paperwork for a sale there is a system of payment that is decided on and it can be installment based. Make sure that mode of payment suits you without compromising your current lifestyle or monetary needs. Your property also needs to be vetted in terms of its potential value as an asset.
The resale value of the home or land along with its earning capabilities (through rental income for example) all need to be assessed before you decide on a price and sign those papers. The costs incurred in fixing up the property or reselling it or making it available for rent need to be factored into the price you are paying. In many cases, the widely accepted legal standpoint is that the seller will have to make due considerations if the buyer has to invest heavily in fixer-uppers of any property that is being sold.
A Realtor With An Impeccable Reputation
A realtor or real estate agent is your guide through the process of looking at different properties and deciding on one. To protect your money and prospects, resist the urge of hiring a realtor that is too young or doesn’t have enough experience. It is well worth paying that 2 or 5% in fees if you are getting a bargain and your investment has been thoroughly studied and vetted. Experienced realtors will often have reliable market researchers on their speed dial and will often know which neighborhoods are currently more lucrative from an investment point of view.
Customize The Contract
As a first-timer in the world of investment buying, do not make the mistake of thinking you need to agree on any kind of standard run-of-the-mill agreement that does not make room for personalized clauses and demands. Work with your respective lawyer to craft a customized agreement after discussion with the seller so that smaller details such as the cost of appliances or leftover furnishings are also included in the contract and nothing important is excluded. Having a good lawyer on your side is imperative so they can read between the lines as new property buyers are rarely well-versed in all the terms and conditions and can get stuck with some terms of a contract that are against their interests.
Locational Considerations
Most people say that location is everything when buying property and this is partially true as location determines the price as well as the resale or rental value of any property. Other locational pointers to keep in mind are the surrounding terrain (this is especially important if you are buying land to make a house on) and the neighboring homes, proximity to schools and grocery shops, and the condition of roads and other amenities.
When buying a property, never base your decision on one factor alone and keep multiple factors in mind, carefully weighing the pros and cons. If you are buying a house that is very old but ticks all the boxes in terms of location and proximity to amenities, it may still be a tricky buy since the upkeep or renovation costs may put you down in terms of profit and earnings.
Look To The Future
A common mistake that first-time property owners make is that they make investments based on their current needs and lifestyle choices. One’s life is always changing, parents keep getting older and children grow up and leave home. Think about the needs of the future when buying property and that includes business decisions along with family life. If you are nearing retirement or want to make investments to that effect, then consider various factors like renovation costs or how quickly the property can generate rental income.
Debt To Income Ratio
Mortgage deductions or initially promising rates of mortgage payments can compel people to spend more than they can realistically afford. A greater number of people in today’s world work remotely or have entrepreneurial ventures ongoing instead of steady salaried jobs. The safety of salaried employment is also at risk as people often leave jobs due to disillusionment or lack of advancement opportunities.
Only invest in property that you will still be able to afford with considerably lesser income without sacrificing other aspects of your life like paying for health or car insurance and maintaining a good lifestyle. Make sure to calculate your debt-to-income ratio as most financial experts recommend and this can vary between individuals and families. Aim for the totality of your personal expenses to fall at around 40 to 48% so that your mortgage can be afforded comfortably.
