SHOULD YOU BUY OR SELL FIRST? THE MOVING HOME DILEMMA…

Reception • March 12, 2020

There are many considerations to contemplate when it comes time to upgrade or downgrade to a new home. While usually exciting, it can be very stressful at the same time.
With our current busy lifestyle, there is already so much to do without the added pressure of dealing with several real estate agents and coordinating a move.
Your buying/selling strategy will largely be influenced by your financial (and sometimes personal) situation, the housing market and interest rates.



Regardless:


  1. you’ll want the best possible price for your current home, and
  2. a great deal on your new one.


The gap in between buying and selling can make a huge difference depending on the property cycle, type of property you are considering swapping to, the state (regional or metropolitan) and the current market conditions in the suburbs you are selling in and
buying into.



SHOULD YOU BUY FIRST?


In a strong market, buying first feels less of a risk as properties are likely to sell well and sell quickly. You will want to buy quickly before the market rises too fast and the price gap between your new and old property becomes too great.
In a declining market, the race is on to achieve the best price possible for your home while there are still buyers in the market and before there is little or no interest left in your property. Then there is timing your purchase and settlement where you do not over pay before the market has bottomed out.


For those who are prepared to buy first, you will need to:


• take a risk that your existing property will sell within your desired time frame and at the price you need for the next one,
• have a strong financial standing to cater for an extended misalignment in settlement dates,
• consider holding the current property and renting it out in the event you can’t sell or want to wait for a better time to sell
• be prepared to take on bridging or other finance options should you need it to cover the cost of the new purchase until such time as the existing property is sold.



Be careful


There are many considerations when using bridging and other finance options:


  • How will you accurately predict how much your existing property will sell for?
  • Do you have an additional 20% deposit or enough equity and serviceability to cover the gap time (bridging loans aren’t covered by lenders’ mortgage insurance (LMI))?
  • If you don’t already own your home, you will be paying interest on both properties and the longer the sale takes, the more interest you will pay. Sometimes it doesn’t pay to hold out for a better sale price as the holding costs may outweigh the additional sale price.
  • You will have additional advertising and property holding costs like council and water rates.


There are a few options for financing properties in between the sale and settlement match up dates.


Don’t worry, we can step you through the details!


Ask us for our topic sheet on these What is bridging finance and what are other alternate
finance options when you are caught in between buying and selling?



SHOULD YOU SELL FIRST?


In a downturn or softer market, it can take longer for a property to sell. On the upside it is also less expensive to buy.

‘Where there are pros, there are most certainly cons!’

Selling first reduces your risk and gives you certainty of exactly how much you can spend on your next home. But of course time is not on your side.


Ideally you will want to align your settlement date of your existing property with the settlement date of your new property so you can move in on the day you move out. But that’s an ideal world! It does and can happen with good agents and finance options
available to you.


Mounting pressure to buy within that settlement period may lead you to make hasty decisions and perhaps not purchase your next home of choice.


If you are considering selling first, there are a few options to think about if you’re left without a new home.



Renting. Really?


Renting after the sale of your property can give you time to make thorough, considered buying decisions.
If you are moving to a new area this could be a great advantage allowing you to try before you buy. (But keep those packing boxes handy – you’ll be moving twice!)



Move in with family


Not everyone has or wants to consider this option.


And we get that!


However, if it is an option for you, while you are house hunting there will be potential savings typically enjoyed in a shared living environment (like mum cooking and doing your washing for you…), and of course NO RENT.
But can you all still live together?! Can you put a cost on that?



Request an extended settlement


When purchasing a home, the settlement process is the last hurdle before you can finally own your dream home and take possession of the property.

Buyers and sellers often negotiate property settlement dates. The people selling their home may also need time to look for another one.

A mutually agreed extended settlement period can give you both additional time to buy the right home. You may be lucky enough to coincide it with the settlement on your new purchase – and only move once!
Remember though – once a contract is signed, the settlement date is fixed – you are committed. The vendors are not required to change the agreed settlement date and there can be severe delayed settlement costs if you cannot settle on time.

In regards to auctions, as the successful bidder, you agree to settle on the date indicated in the contract, so make sure the settlement date in the contract works for you or ask for it to be changed before auction day!



Getting it right


As mentioned, when it comes to changing homes, timing is everything. Juggling both selling and buying at the same time is challenging but possible with the right team by your side.



Obtaining specialist advice is key.


From us, your finance specialist, your local real estate agents or advocates, solicitors or conveyancers. We have contacts across these industries to help you make the right decisions.


Please reach out to see how we can help with your new home transition and give us a call on (03)8657 8664.

Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. ©2020

6 Tips to Help Choose Between Selling or Renovating

By Kola Dev • September 2, 2024
Assessing the benefits of an extensive home renovation against selling your property is always a worthwhile exercise. Selling your home is rarely an easy decision. It will often hold family memories, and that makes it tough to leave. It’s also likely to be your most significant financial asset, and you want to be confident you can maximise its value. The process of selling isn’t cheap with commissions, legal fees and taxes. But the alternatives are to tolerate your home in its current condition or to talk to an architect or builder about giving your home a makeover. That’s not cheap, either. Costs can run into hundreds of thousands of dollars, and there’s never a guarantee the work will finish on time and budget. If you think selling is stressful, you should try a large-scale renovation! Regardless of which way you jump, it’s likely you’re going to need finance - whether that’s refinancing your current loan for a renovation or a new loan for a new property - so it’s worth talking to your mortgage broker to understand your options. Here are a few tips to help you think it through. 1. Structural issues Nothing dates a bathroom like colour. You can tell if it was built in the 70s and 80s merely by the colour scheme. Most bathrooms today are based on white, rather than old school creams or browns. If your bathroom can remember when David Cassidy was making hits, then the time to act is overdue as aging bathrooms usually also have waterproofing issues. 2. Money in the bank You can afford to decide whether you want to pour your hard-earned cash into your existing home, or climb the property ladder and find a superior property. Or if you’ve paid down a lot of your current home loan, you may be able to redraw to fund a renovation. 3. You intend to stick around If your home is well located, you may opt to stay and maximise the potential rather than move. However, if you favour a renovation, be aware that upgrades offer the best payback when you sell within a year or so of the work being completed. Your new kitchen doesn’t stay new forever although it is likely to give you a lifestyle benefit for at least a decade. 4. Big squeeze If your current home is getting too small, you’ve got the option of building an extension, but that means you’ll have to battle the planning process as well as the stress of selecting an architect and builders and perhaps paying rent while the work is being done. If the rebuild is so big that you need to move out anyway, a new home might be a more straightforward option here. 5. Living in the 70s Many owners who take the upgrade path want to modernise their homes. They’re fed up with the rabbit-warren design of small, disconnected rooms and yearn for open-plan living, plus a new kitchen and bathroom. Making such fundamental changes are expensive, and it is worth checking out the prices of more modern homes nearby before going ahead with a renovation. That will help you understand the value that you’re adding. 6. Dead space Poor design can result in some rooms being ignored, either because of their size or their position relative to the main living areas. Real estate is not cheap, so this is very wasteful. If fixing the problem is difficult, finding a new, better-designed property will pay off for you financially in the medium to long-term while also helping you take the next step on the property ladder. Give us a call on (03)8657 8664 to have a chat about the best way to fund your home improvements.

Tax Deductions for Investment Properties Explained

By Kola Dev • August 5, 2024
Owning an investment property is a little like running a business. It provides a great source of income and builds personal wealth but inevitably comes with a series of costs that hit your bottom line. The excellent news for property investors is that many of these expenses are tax-deductible. Tax advantages are not just available on new properties. While an older building may have limits on what you can claim, you do not have to buy a new house or apartment to qualify for tax benefits. There are two components of a tax claim for a rental property. These are: Capital Works Allowance covers the structure, such as walls and roof tiles; and Plant & Equipment covers the so-called removable assets such as carpets, stoves, and hot water system.  You should always obtain professional accounting and tax advice to understand exactly what can and cannot be claimed according to your own specific circumstances as the Australian Tax Office changes the rules regularly. For example, only investors of new property can make claims under plant and equipment assets. However, exclusions exist for those properties that have been renovated. Those who own older properties can continue to depreciate items that fall under the capital works component, so long as it was built after September 15, 1987. And you may benefit from depreciation even if a previous owner undertook improvements. So, working out what you can claim legitimately requires the eagle eye of a professional. In general, you will find the following items are tax-deductible: Costs associated with a property manager, which are usually 3-8% of rental income Accounting and professional financial advice Advertising if required to find new tenants, plus associated re-letting costs Strata levies Rates and land tax Insurances Loan interest and ongoing loan fees Also, work with your accountant or financial adviser to build a tax depreciation schedule for your property. This document will list all the items in your property that qualify for depreciation. It should only need to be completed once, and it can then be submitted to the ATO each year to ensure you obtain the maximum possible tax benefits from your rental property.

A Guide to Purchasing Your First Investment Property (and Beyond)

By Kola Dev • July 1, 2024
Investing in property isn’t rocket science but there are a few rules savvy investors should follow for success. Here are some things we’ll cover in the next couple of weeks to get you started. Should I invest? Investing isn’t right for every one.The first thing you need to do is make sure you’re in the right financial position to take the risk. How do I build a strategy? Before you start your journey you need to do plenty of research and build a strategy around your specific budget and financial needs. How do I choose the right loan? Once you get your finances in order, start shopping around for a great loan. Make sure you get pre-approval from your lender before you start looking for your investment property. How will I manage my investment? It’s important to remember that an investment property is a long term commitment and you need to know how you are going to manage it over the life of your loan. With the right advice and loan, property investment can be the most satisfying and profitable decision you make. If you have any questions or want to discuss whether property investment is right for you, contact us on (03)8657 8664 or email us at reception@futurefinancegroup.com.au
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