Although the idea of buying your first home is exciting, the reality can be another thing altogether. Smashed avocado judgements aside, whatever age you are as a first home buyer, the struggle is real. When it comes to saving for a deposit, finding the property you want within your budget and being able to service the mortgage, it’s easy to understand why more than 30% of Australian choose to rentrather than own their homes.
Don’t give up though just because it seems too hard. It is possible and if you follow these tips for buying your first home and stay committed to your goals, you too can become a first home buyer – and go out for brunch whenever you like.
Be Clear and Realistic About What You Want
Remember it’s your first home – which is not necessarily your dream family home. Being clear about what you want requires focus on more than just picket fences and fresh roses on the kitchen table. It means thinking through why you want to buy a property, how long you think you will keep it for and what return you’d like to make on your investment.
To avoid distraction and overcommitting yourself, start by outlining the details of your ideal property – number of bedrooms, location, features etc. Don’t think about budget to start with. Just get the basics down on paper first, then you can scale your ideal up or down to fit your budget, as you start to research the market.
Start Saving Early OR Start Saving Now
The benefits of setting up a savings routine early in your life cannot be undervalued. Even the smallest savings can make a difference and solutions such as Acorns are a great way to get into a routine of saving and understand just how easy it can be. Another interesting approach is that of BRICKX.com , where you can start your property journey by investing in real estate brick by brick. The habit of taking incremental amounts from your income on a regular basis is no doubt already in place in your life - $2 ATM fees, the extra chocolate bar at the petrol station, in-App purchases on your smart phone. You’d be surprised how easily you can easily transform that habit into one of savings!
This process of saving a few dollars here and there, however, will take you forever to save for a deposit. So once you have these habits in place, start to upscale them. Write a really detailed budget and stick to it. Try to take out only the cash you need each week to limit incidental purchases and cut back wherever you can on general expenses. Anything that’s available or leftover can be channelled into savings. Find high interest earning bank accounts and dedicate a specific amount every month to your savings. If you know how much you want to save, and can calculate the time it will take to reach your goal, this may motivate you to cut back more, save more and reach your goal faster.
Strategic Savings and Investing
Taking a strategic approach to saving can also be useful. Work out how much your deposit is going to be and get a rough idea of your mortgage payments, then try to integrate these numbers into your budget now. If you still live at home you are in the best possible position to do this. Decide what your theoretical rent or mortgage payments would be and practice paying this amount for 6 months or so. Channel this ‘dummy rent’ into a savings account, along with other perceived expenses such as a monthly amount for the electricity bill, internet, insurances etc. Not only will you save a huge chunk of cash towards your deposit, you’ll also train yourself in a pressure free environment to start to live with the expenses of a home owner.
Alternatively, if you already have a decent amount of savings, why not consider investing in something small and inexpensive to start with. There are creative (though sometimes risky) ways to invest your money and increase your capital considerably to help you to save your deposit faster. Investing in a car space for example can be quite lucrative if you buy in an area of commercial development, then sell once the area is established. Alternatively, you could ‘rentvest’ – buy something at a low price with good yield potential then rent the place you actually want to live elsewhere. In this situation, your tenants will be paying the mortgage for you and in some cases even a portion of your rent too. Another option might be to buy something small off the plan, then resell it a year or two later, once it’s completed and before settlement. This could be an interesting entry into the market as a first home buyer, that then gives you more capital to buy the property you actually want in a couple of years’ time.
Whether you are living at home, all expenses paid, or living independently and struggling from pay cheque to pay cheque, there are always possibilities for you to achieve your investment goals. The essential ingredient is of course income, but creative thinking, commitment and patience are also pretty important and if you want it badly enough, the dream will be yours in no time.