A myth first home buyers can’t buy property in today’s market: Brenton Tidow

Potential first home buyers can crack the market if they use the mindset of an investor according to Brenton Tidow, founder of Abakus Apps.

He said while it may take some time to restore the market balance, first home buyers, including young Australian’s in their 20s and 30s who are earning an average full-time income – can crack the property market if they are serious and approach the process with an investor mindset.

"It is concerning that an increasing number of first home buyers are now in their 40s," he said.

"For many buyers, the dream of purchasing a property may seem out of reach, and this is understandable as prices rise and competition intensifies.

"While the prospects of being a lifelong renter are very real, this does not need to be the case."

Brenton offers five tips for new buyers to use as a guide as they prepare to enter the market:

Start small

“I encourage new buyers to consider properties that are not their first, second or even third choice, and to look for properties that fit your initial budget – this could be $200k or $700k it doesn’t matter, as long as you buy with a strategy for growth," he said.

"While I advise buyers to purchase properties that they can see themselves comfortably living in, your first purchase is rarely your last. If you wish to enter the market and climb it, you may need to forgo some of your ideals about what a property should or shouldn’t have.”

Get serious about saving

“Regular saving can make a huge difference," he said.

"For instance, if you plan to purchase a property valued at $375,000, you may need to save around $500 each week for 24 months in order to have enough savings to pay a 10 per cent deposit plus cover any fees – such as lender mortgage insurance, stamp duty, and legal costs (which can cost $20,000 or more).”

Look beyond your horizons:

"To successfully find properties in your price range and in high growth areas, you may need to get comfortable searching for properties in areas that you would not usually live in, including properties in other cities and states on the cusp of growth," he said.

“I bought my first property in Wattle Grove in Perth in 2012 – a three-bedroom house and land package – for $380,000 and earned around $100,000 in equity in 12 months. I’ve also researched and bought into upcoming areas in Newcastle NSW, and the Sunshine Coast in Queensland. Sometimes you need to venture far from ‘home’ to find the right deal.

“Whether you plan to be an investor or owner-occupier, new developments in outer suburban areas can be very attractive for new buyers, and can also be a great stepping stone to your next property. If you’re looking to buy in and around Sydney, areas to consider are Mt Druitt or Newcastle."

Get your loan structure right:

"Getting your loan structure wrong can seriously hamper your ability to buy your first property – and any future ones," he said.

“This is why it is essential to speak to a specialised mortgage broker who understands property investment and who can advise you on the best way to structure a loan that fits your needs and your budget.

“Remember, banks generally lend between 80-90 percent of a property’s purchase price to a first time owner or investor, based upon the lender’s valuation of a property before granting a loan. With this in mind, I suggest buyers give themselves a financial buffer – which may require an additional $10,000 in savings or more. Ideally you want to have this buffer sitting there for as long as you have property. You never know when something unexpected may happen. You can place this money in a 100 percent offset account and reduce your interest paid each month."

Check your eligibility for first home buyer incentives:

"First home owner grants vary between states. For instance, in New South Wales and Victoria, you may be eligible for a $10,000 grant if you are buying or building a new home valued at up to $750,000," he said.

"In Queensland, depending on the date of your contract, you may be able to apply for a $15,000 to $20,000 grant to use towards buying or building a new house or townhouse.

“If buying property is a life goal, then make this a priority. Start saving and seek out a financial advisor and property mentor to get you started – it’s ideal to do this while you start saving, even if you don’t plan on entering the market right away.

“If you’re in your late 20’s or 30’s, don’t be embarrassed to share a house or find cheap rental options – maybe even living with family for a short time could be the answer to saving that deposit quicker. At the end of the day, paying large rent for someone else’s mortgage is only going to set you back from potentially paying for your own."