What Do I Wish I'd Known Before Buying My First Property in 2021?
What Do I Wish I'd Known Before Buying My First Property in 2021?
This article is general information for educational purposes only. It does not constitute financial, legal, or tax advice. Always seek professional advice tailored to your individual circumstances before making investment decisions.
I bought my first property in 2021, and looking back, there are a handful of lessons that would have saved me thousands of dollars if someone had just spelled them out beforehand. None of this is complicated once you know it. But nobody tells you until you've already made the mistake.
Here are the 10 things I wish someone had told me.
1. It's okay to pay a bit of LMI
Don't lose sight of the wood for the trees. If paying $5,000 in Lenders Mortgage Insurance (LMI) gets you into the market 12 months earlier and that earlier entry means $50,000 in capital growth, that's a trade you'd take every single time. LMI has a bad reputation, but I always run the numbers before dismissing it.
2. Look for a value-add opportunity
A renovation, a granny flat, a second dwelling, or simply getting rid of bad tenants can all create equity uplift from day one. You don't need to buy something perfect – and in fact, “perfect” properties generally attract a premium. Whereas, imperfect properties generally offer a discount, with a lack of competitive tension.
3. Get a bank revaluation done every three months
If your property's value has increased, you may be able to release equity, potentially "cashing out" up to 80% of that uplift. Most people wait years to check in on their property's value. Checking quarterly means you can act on growth as it happens, rather than long after the fact.
4. Build an outstanding team of advisors
A finance broker, a tax accountant, and a property manager are non-negotiable. The bonus: work with your accountant to get your ownership structure right from day one. Fixing a structure after the fact is far more expensive than setting it up properly at the start.
5. Lending is everything
Find a broker who genuinely knows how to maximise your borrowing capacity. If you don't, you'll cap out far sooner than you need to, and you might not even realise it's happening until it's too late to fix.
6. Look beyond the Big Four banks
Second-tier lenders can meaningfully enhance your borrowing capacity. The banks you've heard of aren't always the ones that will lend you the most, or on the best terms for your situation.
7. Understand the three-month credit assessment window
Lenders generally look at your last three months of income and expenses when assessing you for credit. Once you know this, you can use it to your advantage, tidying up spending and structuring your finances in the lead-up to an application.
8. Open a separate account for each property
Tax time rolls around faster than you think, and untangling shared expenses across multiple properties after the fact is a headache you don't need. A dedicated account per property keeps your records clean from day one.
9. Learn to run a simple property cashflow
Estimate your rent based on comparable properties, then call around for quotes on insurance, council rates, and interest or bank fees, since these are likely to be your biggest expenses. The aim is to get an idea of what the property will actually cost and return.
10. “Be fearful when others are greedy”
My favourite lesson - borrowed from Warren Buffett: "Be fearful when others are greedy, and greedy when others are fearful." Property markets move in cycles, and the best opportunities tend to show up exactly when confidence is lowest.
None of these lessons are complicated.
If you're an Australian expat in the US thinking about your first (or next) property purchase, we'd love to help you avoid learning these lessons the hard way. Get in touch with CORALA today to have a chat about your situation.