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LIV President's Blog 2012

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The top 5 tips to investing in your first home

The top 5 tips to investing in your first home

Recently the LIV Young Lawyers Section presented “Hot Topics: Money, Money, Money – Your guide to property investment”. There were some great tips and advice imparted – well worth sharing. So here are some of the best tips provided on the night for those aspiring home owners and potential property moguls out there:

1. Always obtain finance pre-approval before buying
Robert Larocca of the REIV pointed out that the First Home Owners' Bonus will cease from 30 June 2012. The First Home Owner's Grant ($7,000 for purchases less than $750,000) is still available, and better yet, first home owners will get stamp duty concessions (which will replace the Bonus). Good news for aspiring property owners!

To maximise your chances, work out how much you can borrow and talk to a broker or loan provider about pre-approval. It is vital that you are in a position to purchase BEFORE you actually raise your hand at an auction!

What you want to avoid is a settlement that doesn't go through because you don’t have the loan capacity to meet your obligations. Sometimes fiddling with an online loan calculator isn’t enough - pre-approval is the key.

2. Use a reputable broker who will complete most of the work for you
But before you run off to see a bank, it was recommended to book an appointment to see a mortgage broker, who will assist in the process.

Paul McCombe of McCombe Finance, said "don’t guess that you will be approved by your bank and go there directly - a broker can assess your application using the bank’s calculators and policies and this will limit the risk of being declined and help you find the best deal.”

"Nothing worse than realising that your dream home, is well, just that…a dream. Make home ownership your reality by knowing your borrowing power early."

Ask friends and family for recommendations to a good broker or bank representative that can help you with the (often) complex calculations. And best of all – this service is usually free (depending on the company).

3. Leverage your real estate agent’s knowledge & experience – they are experts
So now that you know your borrowing capacity, and have your loan approval - it is time to deal with the go-between - the real estate agent.

They know the market. They know the value of houses. Even though their client is the vendor, as Peter Kudelka of Kay & Burton mentioned, “as times have changed in the real estate game, real estate agents are also now proactively assisting purchasers.” However, do your research – not all real estate agents are alike, and often perhaps their reputation precedes them. But who are we to judge – how many lawyer jokes are there out there?

So meet with an estate agent, and make sure you provide him or her with a full set of instructions (type of property; price range etc) so that the agent can arm you with all the information regarding your quest. And remember – always leave your correct contact number.

4. Get a building inspection from a reputable firm
So the real estate agent has shown you your dream home. You love the open plan of the studio apartment or the Edwardian style features of that house with potential, but how much do you really know beyond the aesthetics?

Nothing beats actually getting up close and personal with the property that you are going to invest your hard earned billable hours in. David Hallett of Archicentre brought some alarming statistics along with him including “53% of homes Archicentre inspect have roofing problems.” This can be quite substantial (and costly to repair!). If you know about it, you can ensure you budget for the additional money required, or move on to your next ‘dream home’ as you don't want to realise that the dream is now a nightmare of possible roof collapse, or worse… termite infestation. Book in a building inspection before auction day.

5. Be smart with your repayments
So you have your first home. It hasn't been the long and arduous task you once thought it would be. Tips 1 to 4 got your through the tough bit? Think again. It’s time to be smart with your repayments.

There are a range of options for how you repay your loan: including different payment timing (fortnightly or monthly) fixed versus variable, off-set accounts etc. Importantly, you will need to discuss this all carefully with your broker or lender before you make up your mind about what’s right for you. One option suggested was using an interest only loan, tied to an offset account, therefore you only pay for what you use and can redraw funds if times get tough.

But when it’s all said and done:

Talk to the experts: brokers, real estate agents, building inspectors – they all have the potential to save you thousands and thousands of dollars. So do your research and listen!

Know your borrowing power before you put your hand up at auction – and avoid a property settlement nightmare.
Think about what’s the best repayment strategy for you. Ultimately, buying the right property that you can afford without having to live off baked beans for the next 20 years is critical!

Now that you are armed with the information - happy house hunting and buying!

I’d love to hear from our members with any additional tips on investing in property.

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Cam Forbes
Hi Vicki, this is a great piece - very topical. While the current low interest rate makes repayments easier, obviously this will change when the interest rate inevitably goes up during the life of the loan. Hence your point about obtaining expert advice so that we are prepared for such changes is spot on!
6/06/2012 9:51:39 AM

Vicki Thomopoulos
Thank you all for the comments.

Nick -I agree, we had some great speakers on the night. As to saving for your first home, I suppose this comes down to each individual's finances/budgeting. Probably best for people to discuss with their bank or financial advisors.

Stephanie - Exactly. As noted, it is best to leave your correct contact number, as a lot of people don't!
4/06/2012 12:13:03 PM

There was so much great information presented at this session; one of the things I found interesting was that Peter Kudelka said there are lots of properties that never get listed on real estate websites/ in the papers etc, because the agent is able to match the property with a buyer already "on their books". So apparently it is essential to let as many estate agents as you can know exactly what you're looking for, to avoid missing out on those invisible properties that are never advertised. Who knew?!
4/06/2012 10:41:53 AM

Cal Viney
Thanks for the tips Vicki, a very practical guide for those of us about to take a leap of faith.
4/06/2012 9:09:55 AM

Vicki, thank you for your summary of what was an excellent session. The speakers were great, and the content practical for not just young lawyers, but anyone looking at entering the property market for the first time.

Any tips on how to SAVE for your first home??
4/06/2012 9:07:40 AM

Nick Cheok
Very good summary
3/06/2012 3:15:53 PM

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