It’s been a dream for you to actually build a new home from scratch yet all the stigma attached to affordability and the uncertainty of what the process involves, has hindered your decision and perhaps steered you to consider an established property instead.
Psychology of Property
It can be difficult for some buyers to see a property that is yet to be constructed, as a tangible finished product. The part of our brain that creates mental imagery, interprets input with what the physical world outside brings us. So the experience of perceiving an object that doesnt exist or is part finished, can be difficult to determine exactly what it is we are going to be receiving. Every person’s brain perceives things differently, we are our own unique chemical makeup in this department!
Turning Imagery into Reality
Consider these tips when making a decision to purchase a house and land package and turn your dream into a reality:
Choose the location that you are building in. How does it suit your lifestyle habits? What are the surrounding homes looking like in that area? Is a newly build property going to blend in or stick out like a sore thumb? If it is an established area, and you are building new, then to what budget should you stick to so it is in line with valuation to that area? Are you over capitalising for that area?
Communicate Your Needs. Talk to the builder about your needs based on your budget. Ensure that if you are the type of person that has trouble visualising then consider this a need to fulfil in order to get confident in the process. Take your floor plan and go and look at some display homes from the builder or similar builders or houses the builder has already completed in the area to get an idea of what the finished home is going to look like. Keep it simple and differentiate between your wants and your needs.
Be Willing to Compromise. Understand that you are working within a budget and you can only get a certain amount for that budget. Check the inclusions list and do a google search on the colours, names & brands to start to formulate the level of finishings that are being included. How does this contrast with a higher level finish? Are you willing to consider this as an entry level strategy? Be conservative in your approach and use affordability as a strategy..
Consider this as the home before the home Getting into the property market is no easy task. The trend for the next generations entering into the market is, buying in as a first time investor rather than a live in. This strategy is being used as it reduces the risk to be solely liable for full mortgage repayments, can be rented out and may even attract an income or be positively geared, creates a strong credit profile, and allows you to surf the capital gain wave with potentials to pull down and buy a second time. The worst mistake you can make is having a mindset that buying your first property is a 30 year mortgage, your forever home and you will be carried out in a box. It is not! and circumstances can and will change! You will potentially be selling before 30 years, you just don’t know. So be open to opportunity.
Get your finances sorted. This is really a no brainer. A broker may be able to give you an idea of where you sit financially without having to apply for a loan. This is the first step. Get an understanding of the budget you are working with & how the structure of loan will work for you i.e.: Loan to Value Ratio (LVR), deposits etc . Yes! Get a pre-approval. If you are serious about buying, a pre-approval should be step one in process. It takes time to get your documents together for finance so best to start here.
Weighing up the Unknowns
There is always going to be a level of unknowns (or risk) in a property transaction. From experience you can mitigate this by finding out what the answer will be either through direct questions, backing up with research/evidence or where there is no definite answer; it could go either scenario A or scenario B and how do those two scenarios effect you? What is the probability of either scenario. Is it worth taking the risk?
Existing Properties vs Newly Built
In my professional opinion, buying existing properties have more risk associated with them as the unknowns of issues effecting the structure, surrounding land, history of the development, council approvals, documented plans etc etc are not available to you in full. Part of your building & pest inspection may uncover some of these yet never all. The historical evidence being held for the property and what you are up against specifically where boundary alignment, land quality, building materials, approvals and others are concerned, may impose difficulties if you are considering renovations. Lots of nasties can pop up through renovations and end up being the same cost to build new or in some cases cost you more to renovate.