I'm a Real Estate Consultant, with over 17 years in the industry. The most common question I am asked is what type of Real Estate to buy, but in my opinion it is much easier to warn people of the pitfalls and let them decide.
Here are 5 of the largest mistakes people make when buying Real Estate.
No diversification. Most people put the bulk of their net worth (Money) into their house and then they borrow money to pay for the rest of it. Don’t put all your eggs in 1 Basket!
It is Illiquid. When times are tough and you need the cash, You can’t sell it quickly! The average sale time in the Northern Territory is almost 5 months for an average 3 bedroom home in the Suburbs. That's almost half a year.
It costs more than renting. Most people think you are "throwing money away" when renting. But there are many hidden costs when buying a house!
Transaction costs ( legal, Agent, Title searches, inspection reports) often come up to 5% of the cost of a house. So you are up to 5% down immediately.
Home improvements, upgrades and landscaping.
Ongoing maintenance and repairs. Plumbing repairs, yard upkeep, fixing things etc.
Taxes. You get slugged up to 4.2% Stamp duty at the start. That’s another 4.2% down immediately. Plus Rates, Body corporate, sinking funds etc. The moment your property settles most new owners have lost over 9% of the value of the property.
4. Liability. Suddenly you need to insure the property against some other individual/s damaging your property.
5. NO Job Flexibility! Decisions to move to that new job and more $$$ on the sunshine coast or Canberra can be put in the too hard basket. Moving is harder when you own! The reason why most State or Territory Governments encourage home ownership is because it stabilises the workforce and influences population growth.
It's not all bad news, but it is important to be informed when making one of the largest investments in your life, be it an asset or a liability.