Mercury (Hobart) - Property




SETTLING for second best is nobody’s favourite course of action, but it increasing­ly should be considered amid Australia’s wild real estate market.

It’s heartbreak­ing to hear stories of young buyers continuall­y being outbid for their dream homes because others are offering $50,000, $100,000 or more above what they can afford.

Fair value goes out the window in a property boom. And when the bank won’t lend you more money, or bidding higher will leave you financiall­y stretched, buying real estate can seem like an impossible dream.

But it’s not. Millions of Australian­s have used property to provide financial security and build wealth, and many of them did it by initiating plan B, C or D.

Today, settling for second best might mean a choosing cheaper home, a cheaper suburb, a bigger mortgage or moving back with mum and dad for a while to save extra cash while hoping further price rises don’t outpace those extra savings.

It’s good to remember today’s inflated house prices are unlikely to seem so inflated a decade or so from now. And a huge home loan shrinks over time as home loan balances drop and equity within homes climbs. Other options for would-be owner-occupiers to get their foot in the front door include:

PARENTS providing deposit help or going guarantor for a portion of the home loan, which should only be done after seeking profession­al and legal advice.

PARTNERING up with a relative to break into the market together.

WIDENING the property search into areas previously ignored.

PUTTING property purchasing on hold for a while, but having some exposure to rising markets through fractional property investment­s and real estate investment trusts.

For investors, the equation is often different. Their property purchasing decision should be purely financial and without the emotion that comes when buying something to live in. Investors can:

DO their research to consider a wider range of suburbs, further from their original plans, and also look at regional areas where prices are cheaper.

INVEST jointly with family members such as siblings or parents. Be careful about teaming up with friends unless they’re really, really close.

CONSIDER other types of property assets – such as trusts and fractional investing, as mentioned earlier – to have some skin in the game until markets calm down.

UNDERSTAND how tax benefits such as depreciati­on and negative gearing can dramatical­ly reduce their investment costs even when prices are rising.

I’ve been looking at interstate property investment in recent years and have already had to settle for second-best options when it comes to suburbs and prices that are available and affordable.

But that’s OK, because in a decade or two, it won’t matter that we built 5km further out from the CBD, because outer suburbs eventually become middle suburbs and lifestyle preference­s change over time.

Second best shouldn’t be shunned. The only time it becomes dangerous is if paying too much for a property puts you under so much financial stress you can’t sleep at night.

That’s unhealthy, and no amount of money is worth sacrificin­g your health.

 ??  ?? Turning to plan B might be necessary when it comes to breaking into the market.
Picture: Supplied
Turning to plan B might be necessary when it comes to breaking into the market. Picture: Supplied

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