Why Saving To Buy Your Dream Home Can Be A Big Mistake

In an ideal world, we would find a house we love in the location we love, arrange finance and buy it. That’s the dream isn’t it?

But, in the real world, we have to deal with affordability, competition from other buyers and lenders who want to make sure they’re not taking too big a risk by giving you the money for the property.

First home buyers have it particularly tough as they try to take their first steps into the property market.

These challenges can seem insurmountable, especially when property prices are rising faster than your savings balance.

But there are ways around this. The most important thing is to get into the market. Once you own something, it’s easier to buy your next property. You just have to make sure you buy the first property well.

Options to get into the market include buying with a friend or family member, asking for a loan from your family, buying anything you can afford just so you have a roof over your head.

Another option that I’m seeing more and more these days is to buy an investment property in an affordable, high demand location, rent it out, and get your tenant to pay your mortgage for you (or a substantial portion of it).  Then you can rent the home you love in the location you love. This has become so common that it’s now got it’s own name – Rentvesting. You’re renting your home and investing in a home for someone else.

You’re getting your foot in the door, buying a property that will grow in value faster than you can save that deposit for your dream first home – because you’ve done your research. 

So how do you do it?

I talk about research a lot. That’s because when looking to make a purchase, the first thing you need to do is research, then do some more research. Don’t ask your mates at your next barbecue. Don’t ask your parents who probably haven’t bought a property in the last decade. Seek professional advice. Look for infrastructure investment around the country. Where is private and public money being spent? What airports, roads, public transport links are being built or upgraded? Where are shopping centers, hospitals, schools, universities, business centers being built? New hotels, restaurants, cafes, tourist destinations. These are what you should be looking out for.

Where there is investment, there will usually be job creation, which creates housing demand. The investment into the local area usually brings with it capital growth.

Once your research has led you to the general location that interests you, you need to pinpoint the suburbs that you think will benefit most from the investment. Is there somewhere that is going through gentrification with cafes and cool bars popping up as the mechanics and panel beaters are moving out? Somewhere that is really well serviced by public transport or has great markets, parks or shopping centers within an easy walk? Or really close to a hospital, university or business park? This will help you pinpoint the suburbs and even the streets that you’re interested in.

Then you need to find the property. And this is really important, especially given the horror stories that we’re reading in the media at the moment. It’s almost like you need to be a detective to do due diligence on the site and the developer if you’re buying a new property. If you’re buying an existing property, the risk is somewhat diminished but you miss out on tax benefits that you claim on a new build – and they can be substantial.

So my message here is: you don’t have to wait. Don’t wait until you have the deposit for your dream home. Don’t wait until the conditions are perfect – because we really only ever know they are perfect once they’ve been and gone.

Find a way to make it happen now. Engage experts or become an expert yourself. Do your research and then do some more. Do everything possible now to make yourself look great to lenders so that you’re ready to apply for your loan and that you have top borrowing capacity.

Do your numbers. Figure out what you can afford so that you can still live the lifestyle that you love. Your social life shouldn’t be completely sacrificed for the purchase of your property, and you certainly shouldn’t be living on noodles for the foreseeable future!

You can buy your dream home, but it may not be your first home.