Research before buying property – what does this actually involve?

There’s an oft trotted out line in Melbourne when it comes to property investment – that Research is not just the suburb, north-east of the city. 

And while it’s a light hearted play on words, the underlying message carries significant weight.

Buying a property is a massive decision. It doesn’t matter whether it’s your first home, fifth or sixth investment property. The decision needs to be grounded in research and backed up by tangible evidence to ensure you’re putting your best foot forward.

Let’s take a look at the key research steps you need to take before you launch into the buying process.

Setting down your finance 

For an investment property, consulting a financial planner or an accountant is essential to ensure it fits into your overall wealth creation strategy. 

From an investment perspective, meeting with a financial planner and an accountant helps determine the entity to hold the property in, whether it’s personal names, a trust, or a superfund. They will consider factors like negative gearing benefits, rental income, tax implications, insurance, and property maintenance. Property investment is not a set-and-forget asset. It requires ongoing maintenance, including potential renovations and managing owners’ corp fees, property management fees, council rates, and water rates.

If it’s a first home, you might need to consult a mortgage broker. Finding a good mortgage broker requires robust due diligence. Undertaking research and seeking referrals from friends or family who have had positive experiences can be a good starting point. However, remember that what works for one person may not work for another. 

Homebuyers focus on mortgage repayments, insurance, and rates for obvious reasons. The recent interest rate rises, following years of stability, have significantly impacted many homeowners, highlighting the need to factor in potential rate changes when planning your purchase.

Having a clear understanding of your financial situation will help you determine the type of property, location, and condition when you’re ready to buy. It may also indicate that now might not be the time to make that significant purchase. Your broker or financial planner could suggest waiting if you cannot afford the type of property you desire. Knowing whether it’s the right time to buy is crucial in making an informed decision.

Locking down your service team

Before jumping into the buying process, it’s crucial to have a team of service providers ready to jump in at crucial points throughout the process. Thus ensuring you can act swiftly, make informed decisions, and capitalise on opportunities as they arise.

• Property Advisor or Buyer’s Advocate: While this isn’t a sales pitch, I believe strongly in the value added by a good property advisor or buyer’s advocate. Engage someone early on to understand how their service works. They can provide expert guidance tailored to your specific needs.
  
• Solicitor or Conveyancer: You need an expert in property contracts who can review contracts at short notice. Ensure they can quickly provide feedback on any contract details that need attention so you can move forward swiftly. Some conveyancers or solicitors offer free contract reviews with the expectation of handling the conveyancing if you purchase the property, while others might charge a small fee. It’s essential to know what to expect and to have someone capable of assisting with any legal issues that might arise later.
• Building Inspector: Choose an inspector with the right qualifications and expertise in the type of property you’re considering. For example, if you’re focusing on period homes, find someone who understands their unique aspects, such as lower ground clearance and ventilation issues under the floor. The inspector should be able to perform inspections promptly and provide a detailed report quickly. Make sure they cover the area you’re interested in and are aware of local issues, such as termite susceptibility. It’s also important to ask what they don’t cover, like electrical wiring or the quality of swimming pools, which may require hiring additional specialists.

Understanding the Buying Process

Some might think it’s jumping the gun to focus on the buying process before finding a property, but you might find the right property within the first week or two of searching, so it pays to be armed up with the right information early on.

• Auctions: Auctions are typically the most common sales method, but the process can vary significantly. In some states, you may need to register to bid, while in Victoria, you can simply turn up and start bidding. It’s worth attending a few auctions  to get a feel for the process and understand the auctioneer’s role. Although auctioneers may have different styles, the general format is usually consistent. Reading up on auctions or listening to related podcasts can provide additional insight. Decide whether you want to bid yourself or have someone else, like a professional or family member, bid on your behalf to keep emotions in check.
• Private Sales: Private sales vary by agency, and each will have different rules and procedures. When attempting to buy a property through a private sale, get clear instructions from the agent on the rules of engagement. Understand whether it’s a highest and best offer scenario or if you will have a chance to make a second offer. Knowing these details will help you devise a strategy.

Embarking on the property search

Now that you have your knowledge and supports in place, it’s time to look at the market. Firstly, consider your objective – Are you looking to buy an investment property or a home? What are you aiming to achieve with this purchase?

For an investment property, determine whether you’re focusing on a growth asset or a yield-driven asset. If you’re looking at rental yield, prioritise good quality fit-outs and improvements, as these attract tenants. For growth, focus on properties with high land value and scarcity, where demand outstrips supply, driving up prices. Consider the type of property and location that will support your investment goals. Also, think about the property’s condition. Some prefer properties in good condition to avoid maintenance, while others, with the help of skilled friends or family, might prefer fixer-uppers to add value and create equity.

If you’re buying a home, focus on what’s important to you personally. Consider your stage in the property journey. As a first-time buyer, you might not buy your dream home right away, but rather a stepping stone that allows you to build equity. For those upgrading, think about your current needs and future growth. For example, if you have young children, ensure the property can accommodate your family as it grows. If you’re downsizing, ensure the property suits your needs, considering potential mobility issues in the future.

Decide on the property features that are essential for you. Consider the amount of accommodation, property size, and land size. Decide if you want a property you can improve or one that’s move-in ready. Think about car parking needs, both now and in the future. When considering location, take into account factors such as proximity to schools, public transport, parks, recreation reserves, and family and friends. These aspects will help you determine the best areas for your needs.

Once you’ve identified your property criteria, start your market coverage. Begin with real estate websites to get an idea of available properties. It’s equally important to engage with real estate agents to access off-market or pre-market opportunities. Engage with agents to show you’re serious about buying, but balance how much information you disclose, especially regarding your budget. 

Take home message

Just like the old Scout motto, being prepared is key. 

How you arm yourself-up with the required knowledge is up to you. You can either conduct the research yourself or engage someone to carry it out for you. Regardless, remember to seek advice when you feel uncertain, whether it be from a trusted family member, friend or service provider.

Ensure when the right property presents itself, you’re prepared and poised to capitalise, in order to generate long term wealth creation into the future.