You have done your homework and organized your finances. You know how much you can afford and your ready to start the search for your perfect dream home. Hang on though, there are just a few more things that need to be done on the financial end before you start house hunting.

Determine How Much Money Your Mortgage Repayments Will Be Each Month

On of the most important things to consider when you are budgeting and saving for a home is what your monthly repayments will be. Your monthly repayments on your mortgage should not exceed 25-30% of your total gross monthly income. Most financial institutions will check your level of debt and will not sign off on a mortgage if you are getting in over your head. Car repayments, living expenses, credit card debt and the number of your dependents will all be taken into account when determining how much you can afford for a repayment fee.

Questions To Ask Yourself When Researching Financing Options

There are many different lenders and financial institutions that you can apply to for a home loan. Lenders, mortgage brokers and other financial institutions will actually compete against each other for your business. It is a good idea to check out the website of any company that you are thinking about getting your mortgage from to see how they operate. Here are a few more things to consider:

• Ask your lender what type of loan is best for you, a fixed interest rate loan or a variable rate loan. If you are unsure as to what these terms mean make sure you get a good explanation before you make any decisions.
• Think about how the loan will affect your life. Buying a home is a long term commitment that you need to be fully prepared for.
• Ask about any other fees that will apply to your loan and ask if there are any prepayment penalties.

A good home loan should have the following characteristics:

• Inexpensive with no account keeping fees
• Extra payments should be allowed with no penalties or additional fees.
• No fees for early repayments
• It should offer a free redraw facility
• You should be able to split it between a fixed and a variable interest rate.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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In the last blog post we talked about determining where to look for real estate property and explored using real estate auctions to find you dream home. In this installment we are going to be talking about a couple other ways to find real estate in Australia.

Check Out The Local Listings

One of the first places to check for real estate that is for sale in the area that you wish to buy in is the local paper. This will give you a good idea of what is out there for properties and how much they cost. If you are looking at real estate in more than one area you can purchase multiple newspapers to get a good feeling for what the properties are going for In those different areas. This may help you narrow down your search according to price and desirability.

Once you determine to purchase a piece of real estate property it may also be a good idea to get the assistance of a real estate agent to aid you in your search for property. Look for a Real Estate agent who is registered with the Real Estate Institute of the Australian State where you are looking for your real estate property.

Buying Real Estate The Conventional Way

In addition to using the local paper and hitting up the auctions you can also choose to buy your real estate property in the conventional way. This is probably the most popular way that real estate is bought and sold. The steps to using conventional methods of purchasing real estate are very simple:

• Find a property that you would like to purchase

• Make an offer of what you would be willing to pay for that property

• If your offer is accepted, a deposit can be paid to hold the property until a Contract of Sale is drawn up.

• If, for any reason, you decide not to go ahead with the purchase of the home the deposit is refundable.

• The Contract of Sale will outlive all the terms, conditions and restrictions of the sale. When you sign the Contract of Sale a 10% non refundable deposit is usually paid.

• The contract will undergo the usual round of inspections and searches and once all of those formalities are completed the sale is basically completed.

You can expect to pay an additional 5% of the purchase price of your real estate property in legal fees, mortgage arrangement fees and taxes. Prices will vary from State to State and your real estate agent should be able to give you more approximate figures of what to expect. Whenever you are in doubt be sure to ask any questions you need to until you are completely satisfied and happy with your real estate decision.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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Today we will talk about some more ideas on how to invest smart in this uncertain economy. We have already talked about looking into homes that fall into the lower third of the market and forgetting aspirations of investing in luxury spots and vacation homes.

Set Short Term Leases

The next thing we want to focus on is short term leases. The housing affordability in Australia is at an all time low. Because of this the rent prices are going through the rough. Some of the more heavily populated areas are even reporting that the rents are going up on a monthly basis. In order to keep you own head above the water you may have to raise your rent prices as well. If your tenant is locked into a long term contract you will not be able to do this. That is why, as an investor, you want to make sure you set short term leases so that you can raise the rent when it is necessary. Being locked into a long term contract will not allow you to control the process of your rentals when you need to.

There are also a very large number of people looking for good rentals. This means that you will be able to choose good people to rent out your units, or homes. If you set your leases to 6 or 12 months you will be able to adjust rent process as needed to reflect the current market. And with so many people looking to rent you should be guaranteed that someone will pay your price.

Don’t Minimize Your Options

There are many great places to look at when you are deciding where to buy your investment property. There are also many places to avoid like the plague. When you are looking for your property check out several different locations and pick out a good handful of options. It is best to have five or six places that you really like and would be willing to purchase. This will ensure that you don’t become too attached to one certain house or property. It is important that you don’t get attached to a certain house and end up paying more for it than what you wanted to. Also take your time and don’t rush into counter offering, make sure that you negotiate the price without a lot of emotion.

In the next installment we will be looking at some more ways to make a smart investment choice.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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This is the final installment of our series on understanding real estate terminology. I hope that you have found this series to be useful and beneficial.

• Principal is the amount of money that you borrow. Every time you make a payment on your mortgage you reduce the principal.
• Rates are the annual, quarterly, half-year or monthly payments that need to be paid to the local shire councils for things such as water, sewage, garbage collection and other various amenities. Some rates are also levied to help cover the cost of improvements to the roads and parks. Council Rates are a separate form of property tax that is influenced by property values. The more your property is worth, the more you will be assessed for rates. The rate that you pay will increase as your property value increases.
• Repayments are estimates of how much the minimum amount of money you would need to pay in order to pay off your home over the full term of the loan. Be careful when reading these, as they can be pretty scary.
• Restrictive Covenant is a promise that you agree to refrain from doing something. Some properties have restrictive covenants that prohibit building within so many feet of a body of water. Restrictive covenants can be enforced by a third party.
• Strata Levies vary depending on the age and condition of the building. In tall buildings, or high rises maintenance on the lift can cause the strata levies to increase. Typically these levies range from $300-$3000 every quarter.
• Tenant is a person who pays you to live on your property. The property still belongs to you, but they are paying for the right to live there under a contract. Real Estate agents can take care of helping tenants find a place to live and bringing qualified tenants to landlords.
• Timeshares are buildings or condos that are owned by a large number of people who have the “right” to use their share of the property for one to two weeks a year depending on the terms of their contract.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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