Read an extract from Buy Now – the ultimate guide to buying property!

What’s stopping you from buying property? Is it the changing markets? The needless jargon? The rising costs? Buying property doesn’t have to be difficult; you just need to step up on that ladder. In Buy Now, the new book from award-winning buyers agent Lloyd Edge, you’ll get the simple, straightforward, easy-to-understand advice to help you not only enter the property market, but to launch and grow your own portfolio.

Read an extract below!

Lloyd Edge

Chapter 5: Buy Your Dream Home

Don’t Blow Your Deposit

I think there’s a lot of FOMO among potential investors when the markets start booming. That’s something I talk about a lot: whenever the market heats up, people worry they’re going to miss out on a great opportunity.

As soon as prospective investors have saved their deposit, they often feel they have to rush in and buy. You may be sitting on $160,000 in savings, but you don’t need to spend it all on one property, especially if you’re simply putting that money down on something you can afford. It’s about strategy. You could diversify by spending that amount on a couple of cheaper properties. You might also be able to take out another loan to buy another property. So you could do a 90 per cent deposit on two properties and leverage your lending to different locations.

Often people are confused about what the markets are doing. They ask me, ‘Is now the right time to buy?’ They’ve got the mortgage green light but don’t want to start looking because they’re confused about what location to buy in and scared they won’t find the right property within their budget. Some worry about paying too much or aren’t sure what to buy.

I don’t tell people they can’t have their own home. ‘It’s great to have your own home’, I say, ‘but if it’s going to stop you from reaching your goals, you have to factor that in.’ Then I bring them back to their goals’, and we focus on those.

When potential new clients come to me, the first thing they ask is, ‘Can we discuss what services you offer?’ As you now know, the first thing I always ask them is, ‘What are you hoping to achieve over the next five, 10 or 15 years?’

Most buyer’s agents will say, ‘These are our services. We can help you buy a property. Where do you want us to look? We’ll go out and find it’. And most of the good ones should be able to find you a property, right? But I do a lot more than that, because my focus is far beyond purchasing that property. I want to understand a client’s long-term goals and then help them build a portfolio that will ensure they achieve those goals.

For example, if your long-term goal is financial security when you retire, it makes more sense to invest in a number of properties than to spend all your money on a great home now, because rather than providing financial security, that home is a liability, and you’ll end up just paying off the mortgage. If anything happens to your job or income, you won’t be able to afford the repayments anyway.

If you have a portfolio of investment properties with positive cashflow and something happens to your job, you’ve still got your properties, which basically look after themselves while providing you with a passive income.

Still, some people just want to buy a home to live in, and I’ll help them with that. What we’ll look at will depend on their circumstances, what they can afford and what they want. If their goal is to buy a unit close to the city, we’ll focus on that. We’ll discuss what the mortgage will be, and how much the strata will add to that cost, then we’ll compare that strategy with alternatives, such as buying a house a little bit further out. We’ll weigh up the pros and cons of that option, because further from the city centre, if they’re careful, they could probably get a bit more for their money.

Most of the time they know where they want to live. They can work that out for themselves. I’m not a life coach; I can’t really advise people on it. All I’m doing is helping them clarify what they want and can afford, then sourcing suitable properties.

After I’ve laid out their options, a lot of clients end up deciding to buy an investment property — usually one that’s positively geared and has some value-add opportunity (subdivision, development or renovation potential). They are willing to forgo buying a home today so they can build up their equity and can afford to buy a better home tomorrow.

I still own the Armidale duplex that gave me that big ‘aha moment’ when I first realised the magic of equity creation. It has always been cashflow-positive, and that rental money is part of my income, which now pays the mortgage on my dream home.

Using Investing to Grow Your Nest Egg

To secure your dream home in the 2020s, you will probably need to build an investment portfolio and set an exit strategy, which will mean selling some of your properties to pay down the debt on others. Ultimately it will be your exit strategy that helps you secure your dream home.

As I’ve explained, a home is not necessarily a good first investment, especially if you find you’re then working to pay the mortgage and can’t afford to do anything else (mortgage stress). But if you invest first, and your tenants are covering most or all of your mortgage repayments, you can build up a portfolio that will help you afford a better home later.

In a nutshell, if you have a steady rental income stream from your investment property, the banks will usually let you borrow more money. As discussed in chapter 3, this improves your serviceability — your ability to pay a mortgage. If you buy a home first it’s a liability, and because you’re paying the mortgage yourself, it’ll be tougher (depending on your income) to borrow more. That’s how so many people get stuck at one property and can’t get any further.

You can also find yourself trapped if you’re selling and buying in the same inflated market: you might get more for the property than you paid for it, but you’re also paying more for the next property.

—Buy Now by Lloyd Edge (Wiley) is out now.

Buy Now

The Ultimate Guide to Owning and Investing in Property

by Lloyd Edge

Turn your property dreams into reality

What's stopping you from buying property? Is it the changing markets? The needless jargon? The rising costs? Buying property doesn't have to be difficult; you just need to step up on that ladder. In Buy Now, you'll get the simple, straightforward, easy-to-understand advice to help you not only enter the property market, but to launch and grow your own portfolio...

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