How to make sure you don’t buy too quickly and shoot yourself in the foot

Getting the timing right is a fine art when buying real estate. Some property buyers are impatient and some take way too long to make a decision. And then I have come across others who do both! They look and look and look, suffering “paralysis by analysis” for ages, then beat themselves up and end up suddenly make a rash purchase!

Taking too much time in a rising market can cost you hundreds of thousands of dollars. But, on the flipside, when you work to a self-imposed deadline you aren’t always doing yourself a favour.

These are the sort of reasons I have heard people give for putting a deadline on their property purchase:

  • My accountant said I should buy an investment before June 30
  • My landlord has given me notice
  • I have just sold and don’t want to rent
  • The first home buyer grant is going up/down/going, going, gone
  • Taxes are changing
  • I am about to go on maternity leave. 
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Now, I get that all of these reasons are quite valid and any one of them could cause you stress if you don’t manage to buy before your deadline. But (read this very carefully) none of these can cause more pain than buying the wrong property will.

Let’s tackle these reasons to see how they can each lead you down the garden path.

My accountant said I should buy an investment before June 30.

If you can find a good investment property before June 30, then by all means buy it. But don’t buy just anything in order to make the deadline. Any financial gains anticipated by your accountant will be fast eroded if you buy a property with terrible capital growth or if you pay too much because you are under pressure.

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My landlord has given me notice OR I have just sold and don’t want to rent.

Moving is a pain, moving twice is even more painful. But renting is ALWAYS preferable to buying the wrong home. The costs of buying an unsuitable property because you are in a rush to avoid a second move go beyond financial. Regret is a very uncomfortable feeling, especially so if your partner blames you for being rash…

My pre-approval is about to run out.

I know that the prospect of filling out more forms is daunting but this is a seriously ridiculous reason to rush a purchase. Just get another pre-approval! And if you are worried that the bank may no longer want to lend you any money, maybe you need to put your search on hold while you get yourself into a stronger financial position!

The first home buyer grant is going up/down/going, going, gone OR Taxes are changing.

When the First Home Buyers Grant was first announced, many buyers held off until the new grant came into effect only to see prices rise more than the $7000 the government gave them. Conversely, I have seen people rush their purchase to avoid a new tax only to find that prices dropped after their deadline. We need to remember that it’s often the people who do the opposite of what everybody else is doing that actually make the big gains (a Warren Buffett principal).

I am about to go on maternity leave.

Now I think that this reason is genuinely hard to resist. You need to upgrade at precisely the time when your salary dips and your borrowing power takes a dive. Your stress levels would be at an all time high if you have sold and are worried about being out of the market for an extended period of time.

This is the time when you need to get sound advice. Ask your bank/mortgage broker about the options available to you. If you have sold, consider buying an investment property and renting a family home. Make sure you speak to your broker about the best way to structure the finance and then you can always review the situation in a few years. Engage a buyers’ agent to hunt for both plan A (home) and plan B (investment) and purchase the first good opportunity that presents itself.

Most buyers working to a self-imposed deadline have tunnel vision and only start to think clearly after the deed is done. Obviously, this is too late if it turns out that you have made a mistake. Remember always that the deadline is not as important as buying the right property.

 

 

 

 

Published:-  21 June 2016

DISCLAIMER:

Please note:

Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.

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