How to be a smart first home buyer

There is possibly no buyer more nervous than a first home buyer. Not only are you scared about what having a mortgage is going to do to your quality of life, but there are high stakes in getting on the first rung of the property ladder. After all, a bad move can cost money if the property’s value drops. Almost equally disastrous is the opportunity cost of a property that does not grow in value, or doesn’t match the median growth rate for that suburb. Not only are you looking for a home, but something to leverage off in the coming years when your growing family demands a larger abode.

So, how do you buy a property that is going to out-perform the median growth rate for the area? The obvious answer is to engage professional help. We hand-hold many a first home buyer through this exciting phase of their lives and find it extremely rewarding. But budgets are usually tight and there are many young people out there who we cannot convince to part with the funds required to engage our services. So, if professional help is not an option, you will need to do the research yourself. Really get to know your chosen market and see for yourself which properties attract a lot of buyer interest and which ones don’t. You will probably have to compete harder for a property that will perform above the median. The duds will be pretty easy to buy…

Basically if you look at any ladder, the goal is to get as high as possible. If you can reduce the steps (by making the rungs further apart or by taking two at a time), then you are going to save money in the long term and climb higher in a quicker timeframe. The costs of buying and selling are so high that it makes sense to reduce the amount of  property transactions over your lifetime. So the longer your first home will suit your needs, the better.

We often hear advice given to a first home buyer to stretch yourself as far as you can afford (get used to being uncomfortable!) as the time before you have kids is the best time to build a solid foundation in the property market. This could set you up to be much more comfortable in future years for two reasons. Firstly, you may not need to upgrade so soon if you buy the largest home you can afford now. But you need to make sure it is in a good area. Alternatively, if you stretch to buy in the best area that you can afford, then you will have a greater chance of higher capital growth than if you compromised and bought in a lesser area. Sometimes, however, you will need to buy a smaller property in order to achieve this.

A while ago, Mark Armstrong gave some advice along these lines. “Your first property is arguably the most important because, if you choose wisely, this asset will be the one that will set you on your way to building substantial equity through capital growth… When affordability is a pressing concern, it’s far better to buy a smaller property in a high capital growth area, than a larger property in a lower capital growth area.”

We firmly agree!

If you are preparing to buy your first home and wondering where to start, or are simply overwhelmed and want to get it right, check out this free mini course:

Further reading:

Capital growth or yield? Which will make you rich?


When Is The Best Time To Buy A Property And Stop Looking?


Published:– 16 September, 2011
Updated: 1 April, 2019

DISCLAIMER: 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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