How do I learn about real estate?
January 28, 2010 6:28 AM   Subscribe

How can I, knowing absolutely nothing about real estate or managing my own personal finances, learn enough to get an okay deal on buying a house or apartment in a couple of years' time? Later in the year, I'll finish grad school and start a job paying around AUD $70,000 a year. I have about $50,000 in savings. I'm looking to buy something in Brisbane, Australia.

You know all of those media reports about people for whom adolescence extends into their late twenties? That's me. I know absolutely nothing about money. Certainly nothing about buying a house. I'd like to change that over the next couple of years. What are the best ways for a complete newbie to learn about: personal finance, real estate, and, in particular, which suburbs I should be interested in?

I figure it will take me two or three years to save up for a deposit, which means I have a couple of years to learn enough about real estate that I can make a reasonably informed purchase.

What are the best resources for getting me up to speed?

Thank you.
posted by anonymous to Work & Money (9 answers total) 2 users marked this as a favorite
You are just finishing grad school and you already have a $50,000 deposit? Friend, you are so very already ahead of the game on this one. Most people leave grad school with a negative number in that column!

Maybe there is something AUS specific about real estate purchases that I'm missing here, or maybe there's a between-the-lines reason this is anonymous, but that's already a big enough deposit for a home purchase. More is better, of course, but you're in great shape already.

You should probably find a real estate agent you can trust. That's a bit hard sometimes, so your best bet over the next year or so is probably to ask friends and coworkers and family members who helped them find their house, check references, and so on. A good agent will know the neighborhoods, understand and explain financing to you, and so on. They're really your hired advocate.
posted by rokusan at 7:48 AM on January 28, 2010

My suggestion is dont be in a rush (which it doesnt sound like you are). The biggest piece of advice I tell people when they are going to buy a house is that you need money for the deposit (obviously)but also you should have a nice reserve for the stuff that you didnt know you were going to need in the first couple of years. Everything from the refridgerator going out to the plants you need for the yard. I usually say in the $5 - $10 k range (USD). It might sound a little strange but it helps alot.

Now to answer your question just try to read alot. A great place to start is personal finance blogs. Once you start they will point you to other things to read other sites to check etc. Dont take one persons/websites advice. Look around alot and you'll start to see advice that is mentioned in a few places and that makes sense to you.

Same for suburbs. Check around, ask people. Drive out to a few places on a weekend and look around. Time the commute to work. Its not as hard as you think.
posted by Busmick at 9:17 AM on January 28, 2010

Heres something to get you started.
posted by Busmick at 9:40 AM on January 28, 2010

Buy a book. Home Buying for Dummies was great for me, but it's US specific, and you'll want something Australian. (Real estate laws and procedures vary pretty widely.)
posted by kestrel251 at 9:44 AM on January 28, 2010

Because a real estate agent. Take the courses, don't get certified.
posted by blue_beetle at 10:21 AM on January 28, 2010

++blue_beetle. I did that eons ago and learned a massive amount.
posted by trinity8-director at 12:54 PM on January 28, 2010

Brisbane huh?
Yes, real estate laws vary greatly between the States and Oz. For starters, mortgage payments on your home are not tax-deductible in Oz, but expenses incurred in any investment properties are. Other differences include the fact that buyers in Oz do not secure buying agents, and the seller pays all real-estate agent fees.

Do you want this house to live in or as an investment? If you want to get the first home buyers grant, you will have to live in the house for at least a year before renting it out. Thus, if you want the grant, you will have to buy a place that is within commuting distance to your work.

Where to buy? From my study of Brisbane real estate, buy somewhere within walking distance of a train station. They keep the best value and get the best rents.

How to buy?
Make an appointment with your bank manager and ask for some advice. Let them know what you are planning and let them help you work out what you will be able to afford to borrow.

Then between now and your buying time, see if you can save the equivalent of your monthly mortgage repayment in addition to your living expenses and rent (if you are living out of home). This will be excellent practice and will set you up with a great deposit. You want to have at least 20% deposit so as not to pay mortgage insurance (which protects the lender, not you).

Learning the market
Read the real estate ads. Look through and religiously. Read the real estate investment articles in the Courier Mail. Drive around suburbs that you don't know but seem to have a good reputation for good sales. Apparently, the inner north is the go these days, but only a couple of years ago it was West End, Yeerongpilly etc. But don't buy according to others ideas, buy what and where you like.

The old adage, buy the worst house in the best street, still applies. Do you have any handyman skills? Will you be saving enough to cover renovations? If so, then look at some of the lovely run-down old Queenslanders in the inner city areas, like Stones Corner (bike riding distance to town). If that's not to your taste, look at some of the 1960s apartment blocks around the river. 60s apartments are usually spacious and solid.

Go to open houses of things you think you may like.

Options? Look at investing now in a country house. There are many towns where a $200k house can bring you in $10k a year in rent (which is a reasonable 5% return). Whereas a $1m house in the city could not bring in that kind of rental return (like $1000 week rent). Houses in a town nearby to me are selling for under $200k but returning $220pw rent. Pick a town like Toowoomba, Lismore (NSW) or another rural university town. They are always good spots to buy rentals.

And finally, become your own best advisor. Don't shy from asking any and everyone questions, but distil their answers to suit your needs and dreams. Buying a house can be a very emotional experience, but in the long term it should be a logical one. Listen closely to your own personal logic and don't get swayed by other's emotional responses to real estate.
posted by Kerasia at 3:15 PM on January 28, 2010

Go to a bank on Monday (or one of their websites) and work out how much you can borrow. $50K sounds like a big deposit - until you find out banks are going the same way as Westpac and requiring a 15% deposit and you've only got enough to borrow $300K (after you factor in stamp duty, solicitors fees etc), which isn't going to buy much in Brissy these days. $70K income isn't a lot to service a mortgage, either - I'm on $120K+ and there isn't much left after paying off our tiny $200K mortgage (we beat the boom - just).

You probably have an idea of which suburbs you want to live in and what kind of property you want. You need to work out whether these are realistic expectations given the size of your deposit and your income. If not, something has to give: if the location is the most important thing, choose a smaller house; otherwise, you'll have to move a couple of suburbs over.
posted by obiwanwasabi at 2:19 AM on January 29, 2010

Don't forget that there is the first home owner's savings account - if you want to beef up your deposit, and you are not buying for another 3-4 years, there's a 17% co-contribution (free money!) on the first $5000 you add each year. Downside is that you need to contribute in 4 financial years (if your timing is right, can be much shorter than four actual years) before you withdraw money for a house deposit, otherwise it rolls into super. Choice magazine has details.

Given that you're in Queensland, you might find Queenslander Anita Bell's books interesting. She writes about frugality, buying and selling houses, and the effect of paying off a mortgage early in a way that isn't scammy. This will cover the basics of personal finance, selecting a house, negotiating a price etc. and you can develop your knowledge from there. Neil Jenman is also a good read - mostly to protect yourself by knowing the dodginess and scams practicised by some real estate agents.
posted by quercus23 at 2:57 PM on February 1, 2010

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