When buying a home or investment property, you should weigh the pros and cons to determine your capacity to acquire. Speaking of the word capacity, it does not only entail money. But also, you should prepare your mindset with the various consequences and costs.
You must conduct research when buying land and building. In this way, it enlightens your mind on what to expect. We have listed down all the major risks to avoid when acquiring a property. Here are the key points that you must read:
1. Quick Decision Making
Quick decision making may lead to undesirable results. To prevent you from that scenario, you should create a checklist to help you evaluate your mindset and budget.
List down all the possible costs and requirements that you need to pay. Consider your financing method, whether you will use cash, mortgage, or both. Pick at least the top 5 leading companies and real estate agents to compare.
Schedule free tripping to the locations so you can have a better view of the property. Overall, if you feel satisfied with your research, checklist, and budget, you may now consider buying it.
2. Forgetting about the Other Cost
Aside from the acquisition cost, you must consider the other expenses. For the outlays, you must set a budget for the stamp duties, legal fees, state fees, mortgage insurance, utilities, moving costs, land taxes, and more.
If you bought land, you must advise your tax agent whether you’ll have the intention to construct a building and use it for rental purposes. In this way, you can able to claim interest expenses and rates in your tax return.
Let’s say, you bought land and building and used it for rental purposes. If this is the case, you may report all income and deductions in your tax return. However, if the property is intended for home use, you cannot use the expenses as tax-deductible claims.
3. Liquidity of the Buyer
Ask yourself first if you can afford to buy a property. If you can answer this question, then you’re good to go. However, you should be aware of the expenses in acquiring land and building.
You should check your financing strategies and manage them accordingly. In this way, you can always have available cash to pay for the expenses. Make sure to set your budget for the costs of the property.
After you acquire the property, you must set your budget with the monthly and quarterly expenses. You also need to reserve available cash for unexpected circumstances. In this way, you can able to meet your obligations without causing any delinquent payments.
4. Low Upfront Fees
Most real estate agents are promising you with a low-down payment promo. Well, this might be good since you can acquire a property for a low upfront fee. However, ask yourself if this is convenient for you in the long run.
Many properties are being repossessed due to the insolvency of the owner. Generally, a low-down-payment means you will have a higher monthly amortization. If you purchase a property in a higher upfront fee, it means your monthly installments will be lowered.
Imagine paying a property for 10 to 20 years in a higher monthly installment. Well, it may be a disadvantage to you in the long run because you will never know what to expect in the future. As an example, let’s say you’re a family with no children yet and you recently bought a home on a small down payment.
In this scenario, there are higher chances wherein you will experience financial issues in the long run. Your situation will change when you will have kids and your children need to go to school. In this case, you will suffer financially due to these expenses.
As a bottom line, you should pay high down payments to have a lower monthly installment.
5. Buying a Home with Hidden Damages and Issues
Some buyers aren’t aware of the hidden damages and issues in a property. For instance, you bought a home not knowing that it has certificate issues. Let’s say, it is not registered in the government. If this is the case, you must check first the property if it is registered. For example, if it’s located in Queensland, you can check it using this link https://www.qld.gov.au.
By checking the certificate online, you will have an idea of the property whether it is legal or not. Moreover, you also need to do tripping or ocular visits to have a physical check of the land and building. You may also ask the real estate agent if the property has been fully inspected. If you have already bought it, you may consult a nearby local inspector.
If you’re living somewhere in Queensland, you may consult the Sunshine Coast Your Building inspections. In this way, you can assure whether the property has no damages and if it has some issues, how to resolve it and how much cost to expect.
6. Lack of Research about Lending Companies & Real Estate Agents
As mentioned in the intro, you should conduct a research first regarding lending companies and real estate agents. You may list down at least the top 5 among the best companies and compare their services.
Consider reading testimonies about their clients as well. In this way, you will know how to measure the services of the lending company and real estate agents. You may also ask your questions and concerns via email on the contact section of their website.
Acquiring a property involves several processes and it takes careful planning and financing strategies. However, if you’re able to buy land, building, or a home, it’s very awarding and fulfilling.