Thinking of buying an Apartment, what do I need to know and need?

halfaznpersuasion on 12/02/2018 - 13:57
Last edited 12/02/2018 - 13:58

Firstly i'd like to apologise in advance as i'm sure this question has been posted numerous times before.

Background
- i'm 26, turning 27 soon
- $40,000 saved up
- Steady job, however pay isn't so great.
- Single
- Currently renting

Question

I'm looking to buy an apartment in the city or a small house south of the river. I'm not too sure how I should approach buying property as I have no knowledge whatsover. Could someone give me some insight on how much I should save and/or any other type of financial advise I should keep my eyes open to?

Financial

Comments

  • dust on 12/02/2018 - 13:58
    +1

    South of the river? Which river?

    And are you planning on living in it or renting it out?

    • halfaznpersuasion on 12/02/2018 - 14:02

      South Perth
      and living in it

      • Oz8argain on 12/02/2018 - 15:29
        +3

        damn i thought you meant south of yarra river in melb

        • CyberMurning on 12/02/2018 - 17:03

          yeah me too. with the casino view from the bedroom. ohhhh what a life.

  • CyberMurning on 12/02/2018 - 14:03

    "$40,000 saved up"

    that maybe not enough to pay 20% deposit nowadays. and solicitor. and you dont want to use ALL anyway. your ongoing expenses will be high for apartments. and need some $ aside for other emergencies as well.

    ups, perth. i have no idea how much apartement over there maybe cheap

  • dcep on 12/02/2018 - 14:03
    +1

    keep renting till you've 20% for deposit

    no need to rush, good times ahead (bargains)

    • halfaznpersuasion on 12/02/2018 - 14:12

      Yeah it always feels like so many people are ahead of me which makes me want to push myself to get a property I guess :/

      • Oz8argain on 12/02/2018 - 15:29
        -4

        try off plan?

        • Yttrium on 12/02/2018 - 16:01
          +1

          Noooooooooo

        • Oz8argain on 12/02/2018 - 16:11

          @Yttrium: why?

        • poboy on 12/02/2018 - 19:23

          There is more risk for small reward. A developer may change the design of your place or may choose to drag out completion so they can refund your money then sell for a higher profit to someone else. They may go bankrupt. You have little control or recompense. They have lawyers. They can dissolve and start again. Welcome to Australian regulations.

      • Typical16-bitEnjoyer on 12/02/2018 - 15:57

        Quite a few of the people "ahead of you" are probably experiencing mortgage stress, defaulting or considering selling when they can't keep up.

        Save the 20% and buy something affordable at the right time. No point rushing if you have to sell within a few years. May as well have just rented that entire time.

        • MrBear on 14/02/2018 - 08:36

          Quite a few of the people "ahead of you" are probably experiencing mortgage stress, defaulting or considering selling when they can't keep up

          Or just saved more money.

      • Beanvee on 13/02/2018 - 13:03

        If your parents have equity and will do it for you, they can be guarantors so you can loan without a full deposit.
        Then once you've paid off 20% you can take them off guarantor.

  • atris17 on 12/02/2018 - 14:07
    +2

    Know the strate fee!!!

    I payed 5000 every year for insurance and management

    Sold off the unit and bought a landed house instead

  • dasher86 on 12/02/2018 - 14:19
    +1

    20% Deposit.
    Understand how much you can borrow and stress test it for increased interest rates.
    Buying Costs (conveyor/solicitor, building inspection, stamp duty (?) etc).
    Strata Fee.
    Council rates.
    Water Rates.
    Infrastructure - things you might not think of NBN area?

    Read this as a starter and do more research.
    https://www.domain.com.au/advice/first-home-buyer-checklist/

  • Steptoe on 12/02/2018 - 14:43

    Maybe start small.

    22/221 Clontarf Road, Hamilton Hill
    41/15 Glendower Way, Spearwood

    Whilst you continue to save, live like you are paying the mortgage you think you will need. If that’s $2000 month, save the difference between rent and the mortgage, plus Strata, Rates etc. If nothing else, your deposit will increase

    • CyberMurning on 12/02/2018 - 15:39
      +1

      holy cow those are cheap as peanut.

      • Steptoe on 12/02/2018 - 16:06
        +1

        Depends how low the OPs ego will tolerate.

  • try2bhelpful on 12/02/2018 - 15:08
    +3

    If you can afford it I would look at a house rather than an apartment. Body corporate fees, particularly if you have a lift, gym, grounds etc, tend to be an ongoing pain. Also you will have more of an issue dealing with your many apartment neighbours than your house neighbours. Houses also tend to appreciate better than flats and you can do more to your house when remodelling than your flat.

  • pantsparty on 12/02/2018 - 15:28

    You will need at least a 10% deposit saved up for somebody to give you as loan. I just had a quick look at property prices in Perth and $400k for a 1 bedroom apartment is achievable. Having a larger deposit will help you avoid paying LMI. The first thing you should do if you are keen is meet with a mortgage broker. They will help break down all the costs for you and let you know if this is a feasible option for you. I assume you will be a first home buyer - what kind of grants are available in WA? I know in NSW some first home buyers are elible to have stamp duty waived which is a $20k saving. If you have to pay $20k stamp duty on a property purchase this only leaves you with $20k for a deposit which is definitely not enough.

  • myusername on 12/02/2018 - 15:31
    +1

    you need more money

    • CyberMurning on 12/02/2018 - 15:38
      -1

      It's all about the money money money.. Jessie J on the house!

  • scrimshaw on 12/02/2018 - 15:36

    Be careful of the strata fees, and council fees.

    Some apartments with lifts / swimming pools and gyms may slug with some pretty obscene strata fees, ranging from $500 to $1200+

    My strata fees are $365 for my current townhouse, but while I lived in a unit, it cost around double that.

    Council fees are lower than that, but still need to be considered into your monthly expenditure.

  • Yttrium on 12/02/2018 - 16:00
    +4

    The value is in the land, not the building.

    Think 30 years in the future - the building will be very low quality , but the land will be worth 5x more.

    Do not buy an apartment. Buy a large block of land in good location.

    • CyberMurning on 12/02/2018 - 17:02

      and strata fees will only go up never go down. most off the plan will entice you with low strata fee but then will increase every year

  • spiff on 12/02/2018 - 16:07
    +3

    1) Determine your strategy. Don't buy just because you are feeling left out among your peers. Decide if it's the right time for you as well as the right time in the market? Do you want to buy as an owner occupier or an investor? Is it the best time to buy now? (IMO yes it's a good time to buy in Perth for house and land. Unit market is still flat)
    2) Get up to speed with your finances. Know your cash inflows and outflows for at least 3-6 months if it's been steady. Use some free calculators online to see your borrowing capacity. Set up a meeting with a mortgage broker and get them to apply for pre-approval. This will need to be renewed every 3 months.
    3) Determine your next step with finances. You'll need to pay LMI for anything under 20% deposit unless you're a doctor, dentist, lawyer or a professionally accredited accountant, where a couple of banks (CBA, Westpac) offer a professional mortgage package where you don't have to pay LMI above a 10% deposit. IMO the Perth market isn't going anywhere fast so it's not worth paying LMI if you can avoid it by saving up more.
    4) Once you have a budget, weigh up the options - location and property type. If you're going for a unit I wouldn't look further than 5km from the Perth CBD. Avoid large blocks of unit apartments (anything more than 20 in a block). Also avoid off the plan apartments or new house and land packages as growth is not guaranteed especially in this market, there is likely going to be a dramatic increase in supply short term, and you are paying a ton for their marketing expenses.

    Everything is just my opinion. I bought in the peak of the Perth market in 2014 not knowing any better, so many lessons learned.

    • idonotknowwhy on 16/02/2018 - 13:19

      1) Determine your strategy. Don't buy ever do anything in life, just because you are feeling left out among your peers.

  • toniyellow on 12/02/2018 - 19:06

    If it is your first property and you are planning to live in it you could look into putting some money in this
    https://www.ato.gov.au/Individuals/Super/Super-housing-measu…

    The money you put in will earn a bit better than a high interest saver (the amount you withdraw will increase by the shortfall interest charge rate - currently 4.78%)

    There are also tax benefits, depending on your current salary.

    Although it is such a new scheme there is not much info out there about it.

  • rogue5 on 13/02/2018 - 11:54

    it is definitely a buyers market in perth. take your time and save your money, the market is not going to change any time soon.

    take the time to scour through realestate.com.au or domain.com.au to find places you like - keep notes on each one like advertisement date, price, details etc.
    you won't be buying now but you will get some benefits from doing this;
    see what is around for a particular price and whether you think it is over priced or is good value for money
    see how long a property is on the market
    see if the advertised price drops over time
    once you have saved your cash then go looking, don't set your heart on anything because there will always be another one just around the corner

    it is a buyers market in perth, many people will have purchased at higher prices and now that the resources boom is dead, they find themselves over extended, with very poor cash flow and not able to continue to service mortgages - these are the motivated sellers.
    go in low when you make an offer, really low, you might be surprised in a really lowball offer being accepted. but make sure you have your finances all ready to go first, you don't want to insult them with a lowball offer only to then have to say sorry I can't get the money!

  • Goldcoater on 13/02/2018 - 12:43

    I would go for small house over apartment. Strata levies can be expensive, before you even get to the mortgage repayments. I bought a duplex and I only have joint insurance, no levies. Keep saving and looking around at the market. When you do buy you have the option of letting out empty rooms to help repay the mortgage.

  • halfaznpersuasion on 13/02/2018 - 18:52

    I just want to thank everyone for all the responses! You have all gave me a lot to think about

  • idonotknowwhy on 16/02/2018 - 13:27

    You don't have enough money saved up (or income by the sound of it) to buy a property, and it might not be a great idea anyway.
    Don't be pressured into doing anything just because your peers are doing it. This goes for buying a house, having a kid, buying/replacing a car, smoking, etc.

    Do you really want to be tethered to an apartment with a mortgage right now?

    If I were you, I'd:
    - Go for a holiday and spend some of that. You're not going to be 26 for much longer. I recommend Japan!
    - Keep something like $25,000 in savings in a high interest account like Ubank.
    - Make sure you've optimized your super (don't have lots of accounts)
    - Review utility bills (power, phone, internet, health cover, etc) and ensure you're not leaking money for no good reason.
    - Get an Amex and use it for all purchases where you can avoid a surcharge. Pay it off as late as possible with no interest incurred. Take advantage of the amex deals, shopsmall, etc but don't buy anything you otherwise wouldn't have.
    - Maybe buy some conservative Aussie shares like Telstra or a Big4 bank, which pay dividends. $2-3,000
    - Maybe buy (just buy and hold) some cryptocurrency $2-3,000 worth.

  • kurovon on 22/02/2018 - 03:02
    +1

    Dude, are you me? I'm 26 almost 27, live in Perth, steady job but meh pay, full azn but living with parents trying to save money.
    I've been in and out of property market especially helping my parents with their rentals which are all flats/apartments. I also own one unit but it's performed very poorly from a capital gains and rental yield POV (never mind, you tend to be in the long game with Property anyway).

    Everyone here has made a good point.
    For me, travel was always a bonus but not really a huge thing for me. I do thoroughly enjoy getting away from Perth, but somehow deep down within me I get longer satisfaction from getting ahead. Don't get me wrong, the memories from trips last a lifetime but Perth just reminds you nothing really changes - aka. Dullsville, and soon you'll be longing for the freedom again and spend money to travel again.

    The property market is a bit flat but there is a small pulse going through Perth. It's a good time to buy if you compared prices to 2007-2014.
    The allure of central inner city living and great views will give you sense of achievement, but I never bought into the "prestige" of South Perth or river views.
    You'll soon find the ongoing fees, council rates, insurance yada yada will catch up with you so you'll likely be renting out your place after living in it for a year or so and it's heart wrenching to give up your "baby" home to another tenant, especially when they won't care for it like you would.

    When I was saving for my first deposit, I used multiple high interest accounts to accrue as much $$$ as possible.
    Lurk more on the OzB forums as I've taken advice using tips like AMEX, Cashrewards and online selling to maximise my dollar. You might have saved $40k, but if you're savvy and learn from OzB really you might have $50k in value haha.

Login or Join to leave a comment
Login Join