Property ownership is a statement, an investment, and for many, almost an inherent part of the 'Great Aussie Dream'. Yet, the process of buying a property isn’t as simple as buying a car. There are Whens, Wheres, and Whats – not to mention the ‘Hows' of affording such a big-ticket item.
In our latest Get Rich Slow Club episode, we’re pulling back the curtain on our very own home-buying journeys. This article covers our lightbulb moments; strategies and leverages we employed; the pitfalls to watch for; and allies you need to have. We also share our long-term plans and other ideas that could make property-buying less stressful to your emotions and pocket.
We’re not here to sell you dreams, but to share some ideas. This is a first-hand experience of people who were once in your shoes, feeling the same blend of excitement and nervousness. After all, why learn the hard way when you can glean insights from those who've been there?
So, whether you’re ready to take that step or merely curious about property ownership, we hope our story will resonate, enlighten, and perhaps even inspire.
When, where and what properties did Tash and Ana buy?
A property portfolio across two world cities
Ana's story kicks off quite spontaneously at a tumultuous time. Navigating life after a car accident, Ana made her start in property investing in Vancouver in 2012. With her savings and a bit of support from her parents, she took the plunge with a $425,000 investment in a two-bedroom apartment located near the city.
Fast forward to 2022, and Ana was on her second property hunt in the throes of the pandemic and its roller-coaster effect on property prices. This time, it was a strategic decision to find the ‘right fit’ for her growing family.
They say home isn't a place; it's a feeling. So, before taking the leap, Ana and her partner chose to rent in their desired locality. It was a brilliant way to 'try before you buy' in real estate. Turns out, that locality fit them like a glove. So, after a while, she purchased the Melbourne property valued at over a million.
The perfect find during the pandemic
Tash's story takes a slightly different track. While property ownership was always on her radar, Tash was in no rush. Armed with a deposit and an eye for what she desired, she remained open to possibilities.
Back in 2022, most people were trying to shake off the spectre of covid lockdown. For Tash, however, it was the year in which competition thinned and she found what she describes as her "dream" apartment. The property in Perth has two bedrooms, is located in a desirable area, and housed in a small complex of just 14 units. It had a price tag of only $295,000, which she considered a steal at that time.
The path was clear, the choice obvious – Tash grabbed the chance. And after her fair share of triumphs and adversity, she became a property owner.
How did they figure out how much to spend on property? How did they work towards saving that amount?
Finding a budget range for property buying
Ever caught yourself worried about how much you can really afford for a property? Ana echoes this sentiment, reflecting on her journey towards purchasing a second property in Melbourne.
Rather than simply accepting what the bank was willing to loan, Ana took a proactive approach. She and her partner designed a budget range – a high and a low end. A strategy that seems elementary, but its brilliance lies in its simplicity.
Here's the thing: property prices can be as unpredictable as a roller coaster ride. One day you might be comfortably within your budget. The next, you could find yourself getting priced out. By pre-planning, Ana was prepared for such fluctuations.
It's not just about the purchase price, however. Interest rates, property insurance, stamp duty – all these play a pivotal role. If your budget is a cake, then these are its ingredients. And if one is off, the entire dish could flop.
Adapting to the budget and situation
Life happens – elections, bushfires, and pandemics. Amidst all this chaos, it's easy to lose sight of your financial goals. Ana and her partner faced a challenging dilemma: shift their location preferences or bear higher costs.
Ana's initial plan was a cozy two-bedroom apartment closer to the city. However, over time and with the world's unpredictable events, her vision evolved. At the same time, with consistent savings, Ana and her partner had the flexibility to adapt. So, they found themselves investing in a larger house further from the city, but one they could call home.
Planning with life changes in mind
The week Ana bought her property was the same week she started her role at Pearler and discovered she was expecting. So, Ana’s planning wasn't just about finances. It also factored in life changes, such as the possibility of surviving on a single income, especially with a baby on the way.
Leveraging your assets
Ana underscores her unique advantage in this aspect. She pulled equity from a property she had for a decade in Vancouver. This move not only expanded their budget but also granted her an extra cushion of security.
Having solid savings and strategy
Tash's approach was more of a gradual climb. With savings around the 70k mark, Tash had a clear goal in mind of a 20% deposit. Taking advantage of the First Home Buyers Scheme's benefits, she put down $52k, leaving a buffer in her savings.
The goal? An affordable mortgage. "It was about $260 a week, which I could manage on my own," she recalls. In addition, the absence of communal amenities ensured she wasn't drowned in strata fees.
Did they work with a broker or directly with a bank?
Can you imagine how difficult it must be getting a loan during a global crisis? Just when COVID-19 was creating ripples across the world, Tash was right in the middle of her mortgage hunt. All of a sudden, the Big Four banks were tightening their belts, especially for those in casual employment.
And guess what? Tash had not one, but two casual jobs. Doors at these big banks weren't exactly wide open for someone like her.
"So what did Tash do?" you might wonder. She turned her attention to mortgage brokers.
Despite her determination, though, Tash had a tough time finding a mortgage broker who'd listen to her. Many pushed for a variable loan, citing her youth as a reason to avoid locking herself into a fixed loan. This common consensus among brokers, although perhaps well-intentioned, didn’t align with Tash’s vision.
Tash wanted something stable, something predictable. After all, who doesn't like to know exactly what they'll owe every month – especially in unpredictable times?
Eventually, Tash did find a broker who listened and wasn't deterred by Tash's age or the prevailing trend. She took note of her stellar savings history, her sizeable 20% deposit, and her stable employment in the resilient industry of disability support. In the end, Tash bagged her fixed loan.
What’s the takeaway?
Tash’s story isn’t just a tale of financial triumph; it's a map for others. Her journey teaches us vital lessons:
- Flexibility is key When traditional paths to financing are blocked, don't be afraid to try alternative, equally capable providers.
- Find your advocate A good mortgage broker isn’t just a middleman. They should be a partner who align with your goals and fights for them.
- Your financial health matters A good savings history and a substantial deposit can be persuasive in uncertain moments of securing loan terms.
- Know your worth Tash knew her value and didn't let the common consensus sway her from what she believed was right for her.
How was the process of putting in an offer for Tash and Ana?
Tash’s skillful negotiation
Tash’s story defies the usual route most people take. Instead of getting pre-approval from the bank, which is standard practice, Tash went in a little blind. She put in her offer subject to finance, giving her a three-week window to secure a loan amidst COVID-19. But, as they say, fortune favors the brave, and her offer got accepted.
Ana’s heart-centered approach
During COVID, house viewings were restricted to a mere 10-minute window. Imagine making one of the biggest decisions of your life in less time than it takes to drink a cup of coffee.
But when Ana and her partner found ‘the one’, they moved quickly. They arranged a pest and building inspection the very next day and put in an offer right after.
Yet, amidst all the formalities, Ana tapped into something deeper. She did her research and learned that the home was built and cherished by its original owners. So, Ana penned a heartfelt letter to express her family's wish to continue cherishing the home just as they did.
The outcome? Ana's offer wasn't the highest, but her emotional appeal handed them the keys to the house.
What can we learn from their experiences?
For those on the journey of property-hunting:
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Prepare, and know your leverage.
Both Tash and Ana stressed the importance of preparation and leverage. Tash had the brilliant idea of ensuring her offer was subject to finance. Meanwhile, Ana made certain she had every piece of essential info, from pest inspections to vendor histories.
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Information is power.
Always talk to real estate agents and gather insights without giving too much away. The more you know, the better positioned you are to make an offer that resonates.
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Tap into a genuine connection with the vendor.
Homebuying is an emotional decision. If you're feeling it, chances are, the vendor is too. Recognising this can sometimes give you an edge that money alone can't.
Why Tash and Ana prefer apartments over houses
We often find ourselves swarmed with well-meaning advice when it comes to property investments. "Go big with a house, think of the garden, consider the renovation potential!" But what if, just for a minute, we reconsidered the playbook?
1. Maintenance and Lifestyle Considerations
Tash's counterpoint is that “not everyone's cut out for the housekeeping rigmarole” . She wasn’t keen on renovation hassles or garden upkeep. Living alone, she felt safer in an apartment. No fixing up, no unnecessary stress.
Ana echoed this sentiment. As an avid traveler, she loved the simplicity of locking up and leaving without worrying about lawns or maintenance.
2. A stepping stone to future investments
Saving for an apartment doesn’t mean you’re settling. For Ana, it was a strategic move. The returns from the sale of her Vancouver apartment bolstered her offset account later. This very apartment, which many might dismiss in favour of a house, has been instrumental in her wealth-building journey.
Tash shares the same view. By saving for an apartment, she kept her financial doors open for potential property purchases in the future.
3. Investment potential
There’s a common belief that apartments aren't great investments. Tash challenges this notion. She says her apartment has been hassle-free and is appreciating in value.
On the other hand, Ana envisioned the longer game when she bought her Vancouver apartment. While her parents nudged her towards a one-bedroom, she saw the financial prudence in a two-bedroom place. It meant she could share her space and have the rent chipping away at her mortgage. Later, Ana had the option to rent or sell it to work-from-home employees looking for extra space.
To each their own: purchase the property you’d love
While general advice does float around, property investment is also about leaning into what feels right for you. Sometimes, that means looking past sprawling yards and potential renovation projects. It could be setting sights on something more compact, convenient, and aligned with your current chapter in life. And, as Ana and Tash have shown, apartments can be smart financial plays depending on how you manage and leverage them.
Tash’s and Ana’s long-term plans for their properties
Tash’s positively geared strategy
With her Perth property serving as a rental, Tash is left wondering about how much equity she's built. Can she use this as leverage to buy another property? If the equity cards play right, her next property purchase might just be sooner than later.
However, Tash isn't in a hurry. At the moment, her property investment is “positively geared” – meaning the rental income surpasses (and pays for) her mortgage expenses. Specifically, the property costs her around $300 a week, yet rakes in a rent of $480 a week. It’s a setup she’s quite pleased with at the moment.
What's fascinating is Tash's insight into how she found a positively geared property. She says, compared to hotspots like Sydney or Melbourne, Perth's property prices tend to be lower yet rents are at par. This balance between rents and property prices gives you better odds of finding a positively geared property.
Ana’s strategy
Now, let’s switch scenes to Ana. Her Vancouver property was more than an investment. It was a sentimental journey of her first major financial commitment. Yet, after a conversation with her partner, she re-evaluated her long-term game plan.
Though the property was performing well, being an Aussie resident with a property in Canada meant dealing with tax obligations and heaps of paperwork. Imagine filling out tax forms in Canada and then having to report all that income again in Australia. It was a recurring (and costly) headache for Ana.
Timing, they say, is everything. Ana chose to sell her Vancouver property during her parental leave. This move was not only strategic but serendipitous. She bagged a great deal when she sold the property in a sweet spot between Canada's fluctuating interest rates.
Selling the property not only freed her from paperwork woes but also packed a financial boost. Now, she's channeling those proceeds into her offset, potentially saving a significant sum on her mortgage in the long run.
Did Ana get professional help when she sold her Vancouver property?
There's a saying in the world of finance: “When in doubt, consult an accountant.” Now, we can hear you say, "That's not a real saying," but perhaps it should be. Ana's story is a testament to this.
With a property on hand and a plan of possibly holding onto it, Ana pondered: to sell, or not to sell? What if the property’s price rose in the future? Or what if it didn’t?
Then, Ana did something we often overlook – she reached out for professional help. It turned out to be the best decision she’d made when her accountant revealed the costs of waiting.
To break it down, if she’d stayed in the property, the capital gains for those years wouldn’t have been taxed in Canada. In essence, capital gains is the profit made from selling an asset (like a property) at a higher price than it was bought. However, the longer you hold onto the property after moving out, the more you might end up paying in capital gains tax.
To Ana, her accountant’s insights were a revelation. She realised the clock was ticking. The years she lived in her property were slowly getting overshadowed by the years she didn't. Acting upon this insight, Ana chose to sell sooner rather than later.
Ana’s experience drives home a few key pointers:
- Seek professional guidance. Financial decisions, especially big ones like selling a property, benefit from expert insights. An accountant or licensed financial expert can illuminate paths you hadn't even considered.
- Know the local tax rules. Every country has its tax rules and intricacies. Familiarise yourself with them, or ensure you have someone who can guide you.
- Timing is everything. In the realm of property selling, sometimes, sooner is better than later. But always base such decisions on concrete calculations rather than gut feelings.
Other words of wisdom for anyone aspiring to buy their first property
There is no “right time”
Do you ever find yourself glued to market news, obsessing over the 'perfect' time to invest in property? Here’s a little secret from Tash: “The best time to buy is when it's right for you.” After all, what's the point of exploring the opportunity if it clashes with your current financial or life situation?
Your first property doesn't have to be your dream house
Let’s go back to Ana’s story here. She didn’t buy her dream home straight away. In fact, she started with a modest property that matched her needs, lifestyle, and money goals that time. But the equity she built in that property was her stepping stone to bigger and better things down the road.
Leverage your First Home Super Saver Scheme
The First Home Super Saver Scheme can give you financial leg-up to buy your first home faster. Tash swears by it, although she didn’t use it due to timing. Ana, on the other hand, used it not just once, but twice in different countries.
Financial literacy is self-advocacy
In the world of property buying, nobody will champion your best interests as passionately as you can. Without financial literacy, you might just nod along to the 'experts’ and accept any advice based on presumptions and biases.
For Tash, that moment for self-advocacy came when a mortgage broker she just met made assumptions about her financial worth and situation. As for Ana, she faced the subtle insinuation that without her parents' guidance, she'd be lost.
Yet, both women had been educated about money from an early age. With that knowledge came the confidence to recognise their worth and assert what’s best for them. Financial literacy empowered Tash and Ana to say: "Yes, I do understand my finances, and yes, I am in control.”
Your goals, your aspirations, and your dreams should take center stage in property negotiations or decisions. At the end of the day, you're not just buying a property; you're deciding your future.
Take action this week
Before putting on your property-buying shoes, here's a checklist to run through:
- Research - Have a clear idea about the property prices in your desired location. Tools like KoalaData , a nifty Chrome extender, can offer a peek into previous listed prices.
- Budgeting - Just because the bank gives you a larger loan limit doesn't mean you should splurge. Be mindful of your actual expenses, including those sneaky ones like insurance or body corporate fees.
- Flexibility - Our dream homes from those glossy magazines or movies rarely fit into our real-world budgets. So, strike a balance. Distinguish between what you'd 'like' to have and what you 'need' to have. It might mean compromising on that in-ground pool but ensuring you have a spacious backyard for summer barbecues.
And if you’d like to continue the conversation from other people in the investing community, head to the Pearler Exchange !
Happy investing,
Tash & Ana
