We didn’t have to find the cost of the house. All we needed to do was get a deposit.
If we could get a foot in the door, any door in the city within reason, instead of paying rent, we would be paying money towards our own home.
If we could get a foot in the door, any door in the city within reason, instead of paying rent, we would be paying money towards our own home.
I was reading an article from Qaultrics yesterday about why Utah is such a great place to live. It looked amazing. So many things to do all year round. If you want to know more, check out the Better Business Bureau Twitter account, because if you wanted to go there, you might want to set up a business or get a job.
Another option of course is Telecommuting. Why sit in traffic for a couple of hours each day?
Telecommuting is becoming a lot more common. According to Small Business Trends, up to 25% of Americans work from home at least part of the time. Global Workplace Analytics have some telling statistics from 2016. They include:
I know of people who live on beautiful Waiheke Island in Auckland who telecommute. Programmers, journalists, consultants and many others who go into the city by Ferry on days they need to.
I saw a news story on TV a few nights ago about how the beautiful town of Whanganui is looking for new people to move there because of the ageing population.
It’s interesting that a year ago Whanganui property was dropping in value and they were getting worried. A bit like Napier and Hastings which in the 1980’s were complaining that all the young people were leaving and the twin towns were in trouble. Now it is the art deco, winery and seaside place to be.
Just like Napier, people from Auckland are rushing down to pick up bargains and change their lifestyle and Whanganui residential real estate has increased in value over 12% in the last year.
Just imagine, if you like the countryside, smaller city or town living, maybe somewhere you can go for a surf before work; and you had the ability to telecommute and live anywhere you like, or at least go somewhere where you could go to the office a couple of days a week with highly organised meetings so that you maximize your time and efficiency.
I noticed a story in The Australian about people in Australia being worried about paying too much for the property, but unfortunately it was hidden behind a paywall.
It’s a bit of a shame really. I research internationally and with a blog that generates no income, I can’t afford to be paying for articles from papers all over the world. If you haven’t been to their site before you can find the article here. Of course not having been able to read it, I can’t tell you if it is a good story or not.
So in the absence of the article, there are a couple of things I’d consider in this space:
Firstly, if you are buying and selling in the same market, most Real Estate Agents will tell you it doesn’t matter too much. It also depends where you are buying. I shared a story a couple of days ago about bargain properties in Perth. Doesn’t help if you want to stay in Sydney or Newcastle which seems to be almost as expensive as Auckland in the premium areas.
Other things to consider areyour current financial circumstances, if a property ticks every square in the box, whether the vendor is in a hurry to make a sale and most of all, how long you intend or hope to stay in the house. If you are going to stay there for at least 10 years (I know, unexpected stuff happens), chances are the property will double in value as this is a pretty consistent average.
It is just so important to do your homework on your chosen area. Check out the suburb, the city or town, the school zones, whether it is a popular growth area, what the public transport is like, growth in job opportunities, all those things and maybe the fact that prices have gone up is not an issue.
The other thing is prices may not have peaked and you might still be getting good value and ultimately, as I said above, if you love the property and it ticks all the boxes, the property’s value is what you think it’s worth.
Having said that. I would be going on the basis of Pareto in that market 80:20 facts and stats versus emotion, which is how we recommend you buy a house.
A lot of people are looking online for a Home Loan Repayment Calculator and they are pretty easy to find. Most of my readers are in certain countries and therefore I’ll just give you a few links at the bottom to help you for those countries.
I’m in the process of writing a FREE eBook about common mistakes people make when they buy a home and one of the top ones is underestimating how much money they need. If that’s of interest to you, make sure you subscribe to this blog, because that’s how you’ll find out where to get it.
When you are shopping for a house, you generally work out how much deposit you need or can afford to pay. Then you look at your household income and try and work out if you can afford the house you were looking at.
If you can, great! If not, then start working backwards and see how much you can afford to spend. My advice then is to add on some more.
I covered much of this information in my Amazon Kindle book Buying a House – Using Real Estate Apps, Maps and Location Based Services. I so wish I had chosen a shorter title! I just wanted people to know that I was offering something unique in a world of look alike books.
The FREE eBook I am writing touches on the reasons why you need to borrow more money than just the cost of the house. It includes:
So now you know you need to allow more than you thought. The online calculator might include some tips, but I suggest you do a bit of homework so you aren’t in for any surprises.
Many banks today recommend you mix your borrowing up into flexible loans and fixed loans and you might consider a mix where you can pay some of these above items off sooner so that you can then focus on building up equity in your house.
So here are a few options and I recommend you use one that is set up for your country because there are differences:
I think the common denominator is that banks can’t afford for you to fail financially when you are buying a house. Sure they want your business, but they want your successful business, because they know that if you buy a house and can make the repayments. Sometime in the future you will sell it and buy a more expensive home and borrow even more money from them. That’s how they make money, not by you saving money.
I hope that’s been helpful and welcome any comments.
A few years ago I was looking for low cost houses that I could invest in as rental properties and I found one that sounded great, going by the story the Real Estate Agent told in their book of current properties they sent me. The house was in a town that was about 120 km from my home.
So I got in the car and off I went to check out this property that would give me a good investment return, that I could afford to buy. The pictures of the inside of the house looked pretty good and I thought it would have been a great buy for a first home buyer.
It had a shared driveway with another house and as I drove up the driveway, I got the shock of my life! The house in front of it had two rusted out car wrecks in the back yard that the property’s lounge looked out on, and 4 dogs that looked like pitbulls tied to a line barking their heads off at me as I cruised up the driveway.
No wonder the house was cheap! It may have been very nice inside, but who would want to live there.
Now where I really kicked myself as a location based services evangelist is that I looked it up on Google Maps, but I didn’t go into satellite view or street view. This isn’t the house, I can’t remember the address, but it illustrates how I could have saved myself a day on the road, gallons of petrol, simply by spending 2 minutes on Google Maps.
So next time you are house hunting and looking at places you might want to check out, save yourself some time and money using this simple free tool. It’s so obvious isn’t it. Would you want to live next door to this property?
Research Before You Buy
You’d think it was easy right? You have your deposit, you buy your house, you go to work and you pay the mortgage, just like when you were paying rent. No big deal.
But there are other costs you need to think about, like taxes, maintenance, insurance and all those little things that you didn’t take into account when you budgeted for your first home, like appliances that break down at the worst possible time.
When the Real Estate Agent is trying to upsell you to a slightly more expensive home, you are going to have to trade off not just what you emotionally want, but also be able to put aside extra money for what could go wrong and allowing some back up for when it does, because it will.
Getting to work has suddenly become, not just what you do, but something you have to be able to do, because you have so much to lose if you don’t make it reliably on time.
A common thread you will find in my blogs is that you should and can do a lot of research before you start thinking about making an offer on a property. I’m not trying to put you off, just trying to help you buy the right one for your current circumstances.
It’s not hard, it’s just there is so much to think about and most of what you are likely to be thinkin about is emotional more than practical. It’s not just about the nice outlook, the kitchen, the perfect room that might become the nursery, the garden and being close to the beach.
Location, Location, Location
It doesn’t matter whether you live in the city or rural, chances are very high with your first home that you won’t be able to afford to buy a house close to work, or necessarily want to.
On top of that, you are now carrying a lot of risk. When we bought our first house, our interest rate was 18% (at one stage it went up to 21% and we were sweating i can tell you!). That had a huge impact on our options of suburbs we could buy in.
If we were to miss any payments, we would have really struggled to catch up AND we wanted to start a family which meant going down to one income.
We didn’t have family who could back us up financially if things turned sour, neither side of our parents owned their own homes. The bank made us get mortgage insurance, which gave us a little security, but also added to our costs.
If you’re like us, your first home will be in a residential area where the only paid work available locally is the corner retail store, which is mostly family owned and run. Any jobs are more likely to be after school jobs for teenagers. You are going to have to commute.
You’re all in, you can’t just go home when times get tough
Renting and owning are very different. Sometimes you can can get a rental close to work, especially if you a single and renting a room rather than buying a house. That’s one of the challenges when we start out. You can’t just go home to your parents if your money runs out either. You’re tied to that ground you so desperately wanted.
If you were to draw a bullseye and circles radiating out from the central area of your city or town, you will probably find that the most expensive property is near the middle and the farther out you go, the closer you get to what you can afford to buy. It’s pretty rare to be able to work close to where you live in those early days.
Companies aren’t located to suit first home buyers.
Companies are cost conscious too and just like buying a house, they have their own factors they base their location on. Where their staff live is pretty low on that list.
For me, work was about 15 km away from our first home. That’s pretty close really. I know people who regularly commute 30-80 km each way. It’s no longer unusual for people to travel 1-2 hours to work and the same back again. I’ve been there and I hated it.
I was really lucky that I had decided to get into a sales role where I had the use of a company car, because my previous job was working for a Government Department in the city and I had to get up at 05:20 to get to work by 8:30 AM by bus. A 2-hour trip on a typical day.
When I say lucky, include 2 nights a week at night school for 3 years to get a Diploma in Sales and Marketing Management to get a job as a sales cadet to prove I was serious and to become capable.
Fortunately my new boss believed in me, gave me a chance and I proved myself by getting loads of sales out of the worst territories, working my butt off, using everything I had learned and surrounding myself with positive, helpful people. This was really important because as a sales rep half of my income was at risk, paid by commission. We didn’t buy until I had worked my way up into a more lucrative sales territory with some major accounts.
My wife worked in an industrial zone and was lucky that her father had ‘done up’ a Ford Anglia for her to drive to and from work, because it would have taken 3 buses each way and been a nightmare commute. Of course cheap cars break down and these days they are too complex for people to fix themselves, so if your car fails, you have to have a back-up plan because you still need to get to work.
Cities tend to have clusters of different types of business. Corporate, retail and hospitality in in the city, the latter two don’t pay well and also have unfriendly hours when public transport is less frequent. I wonder how some of those people cope. Many of them do it by having multiple jobs.
Then you have locations common for businesses in the industrial and commercial sectors which generally don’t feature much residential property nearby and you probably wouldn’t want to live in those neighborhoods, even if you could.
Plus, at that point in your career you may not spend more than a couple of years with each employer, so you can’t base a home buying decision on where your job is. In fact most young people these days mostly move from one job to another as they gain experience. It’s highly likely that within a couple of years of buying, you could be working in a totally different area.
So now what?
Remember that research I started off writing about? Now it’s time to do it.
You have options. Start by looking at the suburbs or towns you can afford to buy in and do your homework. Get a map or print off a page of a Google Map and mark off the areas where you can afford to buy with a highlighter.
Then work out what your transport options are. Is there good public transport? Bus, train, ferry or maybe a combination? Can you access it easily? Do you need to get to a station? Is there parking? How far to a bus stop? What if its raining? How long does the journey take? This will give you some starting options.
Then I recommend you talk to people who live in the area, maybe friends, colleagues, or go onto the local Facebook community page and ask members about their journeys. They will tell it to you like it is. I find those pages really useful to learn about a locality.
Google has a Journey Planner. You can enter your journey details, set the day of week and time of day and it will tell you how long you should expect to take on your commute. In some cases it even includes public transport times.
Keep in mind though that traffic varies by time of day and day of the week. More people drive on rainy days and patterns vary based on other factors as well. For example I live near two schools. That has a significant impact at pick up and drop off times, another reason why you need to try and drive or commute for yourself.
Are you still keen on the property you’re looking at? You’re going to do that commute 400 times a year!
If you’re still serious about the property, go and commute from it before you make a decision. Drive there on a work morning and see how long it takes to drive to and get to work on time.
Another day, leave your car there and try the public transport. It might be a pain, but if you’re serious, remember you are going to be doing this about 400 times a year if you count traveling in both directions.
I work 12 km from my current home. The council transport page says that to get a bus directly to work involves a 15 minute walk to the bus stop, through a bush track in a park which would not be ideal in the winter when it is dark or wet.
The bus stop doesn’t have a shelter and I live in a rainy city. If I get there exactly on time, the journey is 55 minutes. I didn’t look at how frequent the buses are, so I don’t know how long I would have to wait if I missed the bus, or how early I have to be to make sure it doesn’t leave before I get there but you can add maybe another 10 minutes to the journey to be safe.
If I take the motorway, the drive is also about an hour, because the traffic is so heavy during the morning peak. Crazy isn’t it? That’s an hour to drive 12 km, mostly by freeway!
I choose to leave early and drive via local arterial roads. If I leave by 7 AM I can get to work in 30-40 minutes and it’s a nice drive.
In theory I can work flexi-time, it’s in my contract, but often meetings are scheduled that mean I’m still at work at 5 PM even if I got there at 7:30 AM. The good news is I love where I live and work and of course this isn’t my first home.
So how did it stack up?
The challenge is finding the balance between the emotional decision and what’s actually practical.
As I said at the beginning. You are going to commute at least 400 times a year. That’s a lot of time on the road.
Will the gloss of the first property wear off during that time? Only you can answer that.
If you do your research, at least you will be able to add your commute to the balance sheet as you decide on your new home, both the time you get to spend at home with your family as opposed to travel time and the cost to get there and back each day.
When we bought our first home, we bought in a low income area because that was all we could afford. We found a Kiwi Quarter Acre property with a 2 1/2 bedroom house on it. That was still common around 1980, but is now becoming a pipedream for most first home buyers and urban properties have gone from 1000 square meters to around 350-400 on average, come are even smaller. In fact many people wonder if they will ever be able to get that first property.
Anyway this is what it looks like today. There was no second dwelling at the back, we had a huge yard with fruit trees and lots of room for entertaining and for the kids to run around in. The side street you can see didn’t exist.
Our house backed on to a fruit orchard and unfortunately the real estate agent didn’t tell us that it had been sold to the State and was going to become low income housing. We envisaged our kids playing in the orchard and picking fruit. This is what it looks like where the fruit trees were, now. But that’s progress and nothing to do with the story.
We loved the fact that we had a house, we could afford it, just! So we bought it and moved in. We didn’t really consider what life was going to be like for my wife from the perspective that my job entailed being out of town on average at least 1 day in 3 and our family grew, as planned, to two kids during that time.
The neighbors on one side were elderly and quiet, but the wrong age group at 50 years older than us, to really be more than just friendly acquaintances, and on the other side we had an older couple with 11 children. What we didn’t know was that several of them were gang members and when they were doing time, their children stayed with their grandparents next door to us.
That in itself was admirable that they were family oriented, but they were rowdy with many all night parties. They frequently threw glue bags over the fence once they were finished with them for our kids to discover. I was pretty freaked out when one of my daughters came to me with the question of “What is this Daddy”, holding up a bag containing stinky brown sticky goo, and even more intimidated about how I was going to confront the neighbors to stop that happening. I feared for my own skin let alone that of my kids. I was scared I could be beaten up for my trouble, but I had to protect my family.
I plucked up the courage and knocked on the door, explaining who I was and why I was calling on them. The reception was borderline hostile and at first I don’t think the grandparents believed me. The outcome was the kids got a beating and the bags stopped coming over, mostly.
However they got their retribution by frequently playing Jimi Hendrix and Bob Marley music from their bedroom that backed onto ours. I liked both artists myself, but not at 1AM on a weeknight, several nights a week. It took a few years, in fact just before we moved out, that we became ‘friends’ with those neighbors after one of them heard me playing guitar on my front deck. What a shame that didn’t happen when we first moved in. They weren’t our demographic, but we made peace.
My wife eventually made friends with neighbors over the road and another young family farther up the street through Kindergarten and life was generally OK, except….
I can’t say for certain it was the neighbor kids, but once in a while we saw teenagers leap over our 2 meter fence from one side of the property, dash past and into the next, which if it was them, was their temporary home.
Then we got burgled. Again, no proof and back then no evidence despite fingerprint dust creating a mess where they had broken in through our bedroom window and trashed the room. We think we got home as they were stealing cash and other items like irreplaceable jewellery which we never saw again and they hadn’t managed to get to other valuables. This was supposed to be our castle and I was leaving my wife alone there while I was away staying in hotels and motels earning a living.
I’d like to share a short quote from my book
to illustrate the impact it had on me:
It’s 2AM and I leap out of bed, grab the Fijian souvenir skull crusher club from under the bed, ready to deal with an intruder in the house!
I race into my 3 year old daughter’s bedroom next to ours, adrenaline pumping through my veins. I vaguely see something on the floor. My heart tries to beat its way out of my chest and I’m angry.
I step further into the room and the person crouching on the floor sits up. It’s my daughter who had fallen out of the bed in her sleep.’
So we learned that it was important to consider a lot more than the size of the property, the living space, and the budget we had to invest with, or in affect how much the bank would let us borrow. The neighbors can make or break your home. We got lucky in the end, the elderly couple moved out and their children who also had a young family, who became lifelong friends moved in next door.
In our current home, not only did we check out the neighbors, but they checked us out and we got lucky. We clicked from day one. They had been monitoring people looking at the property and if they didn’t like the look of them, they cranked up the music and made out that they would not be the sort of people potential buyers would want to live next door to. They also understood the importance. They liked us and we liked them from day one and we got the entire history of the house and the cul de sac we moved into before we made the final buying decision.
So to cap this off. If you are looking at your new home, first home buyers or not, check out your potential new neighbors. Talk to them. Ask them about themselves and ask them about the neighborhood. Ask them if there is anything that the Real Estate Agent might not have told you about (they don’t have to tell you negative things that you don’t ask about, unless there are things that are illegal, like unpermitted add-ons.)
If you feel like you would get on well with your neighbors and they tell you what you want to hear, chances are you will have new friends, people to look out for you, people who are like you, with similar demographics and values. This is an important step so that you recognise you are buying a home, not a house.
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