How to avoid the winter home buying blues: The case for and against buying
now
By Mal James
Thursday, 05 July 2012
Let's start off with the winter 2012 $1 million question: Is it a good time to buy or is it a good time to wait? The argument for waiting and renting We all need roofs over our heads. What is the difference between paying rent to a landlord and rent to the
bank (that's what a mortgage is - you are renting money from the bank with
the interest you pay)? On a $2 million home that you resell in two years for the same price (if you
sold it because it was a bad decision) you may have spent say $300,000 -
stamp duty ($110,000), reselling fees ($60,000) and mortgage payments
($130,000). Now if that home went down in value and you had to sell it, it's
quite possible you could end up with a half million-dollar loss on top of
that. If, however, during that same time you rented a $2 million home, your
total outlay would be somewhere between $80,000 and $120,000 for rent. Renting in that scenario on a $2 million home could be a $200,000 to
$400,000 better decision. Suggested guidelines if you are to rent. Are you new to the area? Rent a home in the area you are planning to buy in,
as this should help you understand the subtle nuances of precincts. Rent a good home. If you rent a crap home just because it's cheap, it may be
counterproductive, as all you will want to do is rush to leave. That puts
pressure on you buying a home, which can often be negative as you are forced
to make a hurried decision. Rent for 12 months. In this market it may well take you some time to find
the dream home. Important rider: We are making a case for short-term renting as a way of
giving you time to find and buy the right long-term home. But long-term
renting is rarely the answer to long-term emotional and financial happiness
in Melbourne. We have met very few rich and long-term happy renters. The argument for buying now and trading up Most selling agents have begun to trot out the line that now is a good time
to buy if you are trading up. We have to agree. In this market, the gap between lower-priced and higher-priced homes is
getting smaller. Therefore if you can find a good home now (and it is still
possible), then trading up is certainly better now than it was during the
stronger market of, say, early 2010. Say in early 2010 when we had a strong market and lots of stock, your $ 1.5
million home had one bidder and you sold it for $1.5 million. And then you
went and bought a $3 million home that had three bidders and you bought it
for $3.2 million. At that time the mortgage gap was $1.7 million. In 2012 your $1.5 million home may have had two bidders and sold for
$1,420,000 - prices have dropped a bit but because stock is short on good
family homes at your level and you priced it correctly, you had bidders. You
had already bought a ripper $3 million home off market that was negotiated
over a three-month period for $2,720,000. In this case the mortgage gap was
$1.3 million. Similar houses, different times. You've also paid $20,000 less in stamp duty
and your mortgage is cheaper to maintain. $1,700,000@ 8% = $136,000 as
opposed to $1,300,000 @ 7% = $95,000. Yes, the figures are approximates, but
you get the drift. Of course it needs to be the right long-term home - a good decision. Buying
now because rates and prices are cheaper only makes sense if it's a good
decision for your long-term emotional and financial happiness. But be
patient.
unquote
Best Regards,
Linda & Carlos Debello
LJ Gilland Real Estate Pty Ltd
http://twitter.com/GillandDebello
http://au.linkedin.com/lindajanedebello
http://www.facebook.com/pages/LJ Gilland Real Estate Pty Ltd
Confidential email:- The information in this message is intended for the
recipient named on this email. If you are not the recipient please do not
read, copy, distribute or act upon the message as the information it
contains may be privileged. If you have received this message in error,
please notify the writer by return email. Thank you very much for your
assistance in this matter and your co-operation. Should you wish not to
received research and interesting subject which the writer has contained in
the email for your empowerment, please notify the writer of that as well as
he/she only has your best interests at heart with thanks. Have a great day!
now
By Mal James
Thursday, 05 July 2012
Let's start off with the winter 2012 $1 million question: Is it a good time to buy or is it a good time to wait? The argument for waiting and renting We all need roofs over our heads. What is the difference between paying rent to a landlord and rent to the
bank (that's what a mortgage is - you are renting money from the bank with
the interest you pay)? On a $2 million home that you resell in two years for the same price (if you
sold it because it was a bad decision) you may have spent say $300,000 -
stamp duty ($110,000), reselling fees ($60,000) and mortgage payments
($130,000). Now if that home went down in value and you had to sell it, it's
quite possible you could end up with a half million-dollar loss on top of
that. If, however, during that same time you rented a $2 million home, your
total outlay would be somewhere between $80,000 and $120,000 for rent. Renting in that scenario on a $2 million home could be a $200,000 to
$400,000 better decision. Suggested guidelines if you are to rent. Are you new to the area? Rent a home in the area you are planning to buy in,
as this should help you understand the subtle nuances of precincts. Rent a good home. If you rent a crap home just because it's cheap, it may be
counterproductive, as all you will want to do is rush to leave. That puts
pressure on you buying a home, which can often be negative as you are forced
to make a hurried decision. Rent for 12 months. In this market it may well take you some time to find
the dream home. Important rider: We are making a case for short-term renting as a way of
giving you time to find and buy the right long-term home. But long-term
renting is rarely the answer to long-term emotional and financial happiness
in Melbourne. We have met very few rich and long-term happy renters. The argument for buying now and trading up Most selling agents have begun to trot out the line that now is a good time
to buy if you are trading up. We have to agree. In this market, the gap between lower-priced and higher-priced homes is
getting smaller. Therefore if you can find a good home now (and it is still
possible), then trading up is certainly better now than it was during the
stronger market of, say, early 2010. Say in early 2010 when we had a strong market and lots of stock, your $ 1.5
million home had one bidder and you sold it for $1.5 million. And then you
went and bought a $3 million home that had three bidders and you bought it
for $3.2 million. At that time the mortgage gap was $1.7 million. In 2012 your $1.5 million home may have had two bidders and sold for
$1,420,000 - prices have dropped a bit but because stock is short on good
family homes at your level and you priced it correctly, you had bidders. You
had already bought a ripper $3 million home off market that was negotiated
over a three-month period for $2,720,000. In this case the mortgage gap was
$1.3 million. Similar houses, different times. You've also paid $20,000 less in stamp duty
and your mortgage is cheaper to maintain. $1,700,000@ 8% = $136,000 as
opposed to $1,300,000 @ 7% = $95,000. Yes, the figures are approximates, but
you get the drift. Of course it needs to be the right long-term home - a good decision. Buying
now because rates and prices are cheaper only makes sense if it's a good
decision for your long-term emotional and financial happiness. But be
patient.
unquote
Best Regards,
Linda & Carlos Debello
LJ Gilland Real Estate Pty Ltd
http://twitter.com/GillandDebello
http://au.linkedin.com/lindajanedebello
http://www.facebook.com/pages/LJ Gilland Real Estate Pty Ltd
Confidential email:- The information in this message is intended for the
recipient named on this email. If you are not the recipient please do not
read, copy, distribute or act upon the message as the information it
contains may be privileged. If you have received this message in error,
please notify the writer by return email. Thank you very much for your
assistance in this matter and your co-operation. Should you wish not to
received research and interesting subject which the writer has contained in
the email for your empowerment, please notify the writer of that as well as
he/she only has your best interests at heart with thanks. Have a great day!
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