How to buy a property when you think you can’t afford it

Is it true? Or is it an assumption?
Often in life we make assumptions. We might think something is true and act as if it is, without checking out the facts. It’s like that old fable about the elephant who was chained to a small metal peg when it was young. Even when fully grown, it still falsely believed itself to be trapped and immobile.

Similarly, we can make outdated judgement calls, potentially in every area of our lives. But you cannot afford to do this with your finances. It’s also hard to count your money with your head in the metaphorical sandpit.

What is your real financial situation?
The first step to surfacing out of the financial fog is to take a good look at your money coming in and your money going out. This action may seem basic, but often it is consistent application of simple principles that can make the difference in your finances.

If you want to know where your money is going, start writing down your expenses and income. I mean down to the cent, every day. Very soon you will recognise sneaky spending and everyday habits that eat up your money.

The one money tip that could change your life
If knowledge is power, then having the exact numbers that spell out your financial present is imperative for building a better-funded future. Once you have a notebook full of expenses for three months, pop them in a spreadsheet under expense and income category headings, for e.g. rent, groceries, transport, etc.

Tracking money can be a very powerful process, as it sheds light on the types of things you regularly overspend on, and equally, the categories where you are too miserly. The next step is to check if your spending is aligned with your life values.

For example, if you say you want to buy a house but are letting money slip through your fingers via careless incidental spending, then what you’re saying and the actions you are taking don’t match up. To bridge this gap and make tracking expenses a breeze, try using budgeting apps like Wally or Mint.

How to buy a property when you think you can’t afford it

But what if I have bad credit?
Another reason that you may think that you cannot afford to buy a home is if you have a bad credit history. While it is true that a bad credit history can make it harder to obtain a home loan, there are options. Selected lenders do offer bad credit home loans, enabling you to get your foot into the property market.

While you may be paying a higher interest rate initially, at least you will be progressing toward owning your home, and remember, it may be possible to refinance your loan later.

But I’m looking for an investment property…
If you are looking to buy an investment property, the rules above still apply. You will still need to be on top of your personal finances. You will need the self-discipline to make the most of your income and save for a deposit. You will also need to be clear on the kind of investment property that makes sense for your current financial circumstances.

As when buying any property, but even more so for investments, it is vital to seek professional advice to help you make sound decisions and be aware of any possible traps for new investors. The point of investing is obviously to make money. So taking due diligence and getting experts on your side will increase your chances of a positive outcome.

Recommended experts in property investment
To smooth your investment property path it is wise to seek out council from the following kinds of property experts:

Real Estate Advisor
When looking to invest, it is important to find the right kind of property, especially if this is your first rodeo. Initially, you may not be able to start with a property in the most desirable area of town, but a real estate advisor can help you find which suburbs will have the greatest potential for returns given your ideal buying price.

Finance Broker
A finance broker can aid you to find the best home loan to suit your circumstances. They will take into account your income, credit history, and overall financial stability to suggest a finance option to suit these variables. They can also put a good word in for you with lenders, by focussing on the strong points of your application.

Property Buyers Agent
A buyers’ agent is a licensed real estate agent who acts on behalf of the buyer. These experts can give a new investor the best possible chance when it is time to negotiate with a seller. When engaging a buyers’ agent, choose someone who knows your property market inside out and who has finely tuned negotiation skills built on years of practical experience.

Qualified Property Inspector
Property inspectors are essential to ensure you are not going to be unpleasantly surprised by your investment after the money is paid and all is said and done. A qualified property inspector can alert you to problems such as leaks and damaging moisture, asbestos, termites, and any structural issues which may not be visible to the untrained eye. If you can, get your buyers’ agent to negotiate for the sale of the property to be conditional on a property inspection to cover yourself. It could save you a lot of money and hassle down the track.

Conveyancing is the legal process of settling the sale agreement and transferring property ownership. The conveyancer will, therefore, create documents, work out the rates and taxes involved and mediate between buyer and seller on legal issues.

By getting the right advice from experts when you are ready to buy, you will have the best chance of finding the right property for you, whether it be for a new home or investment. Getting clear on your current financial situation and tracking your spending so that you can save more quickly and effectively is essential when you are thinking of buying a property. Don’t make assumptions about your ability to purchase a residence before you have sought valuable input on the options available to you. Remember the elephant and don’t be held back by a small metal peg!

What are your thoughts on buying property?

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