By GUNAPRASATH BUPALAN
The decision to purchase a property is perhaps one of the largest and toughest financial decisions an individual will make in his or her life. For many, it’s literally talking a loan for the rest of his or her life and utilising their lifetime savings, in other words, wiping them dry.
Many a time, there are certain things that people tend to overlooked, causing hiccups when it comes to the purchase process. The below tips may help when buying a property.
Do not change jobs
If you are going to purchase a property within the next year, do not change jobs. One of the criteria for a loan approval from the bank is job stability. Even if you leave your current position for something that pays you higher, or a higher-ranking position, the bank will still see this as a negative. The rule of thumb is that, in order to be deemed a credible borrower, you should be in your current position for at least a year.
Do not take up a new car loan
As car loans are included in an individual’s credit scoring points, purchasing a new car with a new car loan may adversely affect your ability to get the mortgage you require. It is not just car loans, but every type of loan plays effect. Best is to obtain that housing loan first, then look at all other loans you require.
Do not make big purchases with your credit cards
Similar to the previous point, when you are in the process of applying for a home loan, all other financial commitments will come into consideration. Having huge purchases on your credit cards or applying for new cards may adversely affect your credit score. So, hold that urge to spend, you will have ample of time to spend for your new home once you obtain it.
Understand all the costs involved in a property transaction
For many, buying a property is something they will not do very often. Hence, they may overlook certain costs, which are required to be fork out. When in doubt, check with a real estate professional or a financial planner.
Buying a property not only entails monies like deposits and stamp fees, there are legal fees as well as other miscellaneous fees involved. Check with your bank whether you are required to pay for amounts like the valuation report or an insurance policy.
Budget for extra expenses
Putting aside a significant amount for repairs and renovations will be a good idea too as it is almost guaranteed that you will want to make some changes to the property you have purchased.
Many times, buyers merely set aside the required down payment and transaction fees. Buying a property is much more that that. Setting aside RM50, 000 for renovation and trying to stick to this amount is a prudent way of handling your money. However, you should set aside some money in case of contingency needs. A second-hand property may have some damages, which may not be visible when you view the property. Such problems may surface once your renovation contractor starts working on the property. At this point in time, the reserved fund would come in handy. If there were no existence of such a fund, at this juncture, you would be scratching your head in worries on how to get the repairs done.
Consider an older and less renovated property if it is cheaper
Many times, buyers get attracted to properties that look ready to move in. Few can look past a run-down property at a bargain price and envision the potential of what it can become.
Yes, renovation is a lot of work, but if you can get a similar property for 10 to 20 per cent less than what a nicely renovated unit is going for, perhaps the work may be worth it. Remember the term – penny wise, pound-foolish.
Do not make your purchase decision based on the assumption that your income will increase in the future
This is a common mistake when it comes to property purchase. Many people tend to stretch their finances to the maximum and assume that their future income will be more than what it is today. This assumption is dangerous as no job is stable and you should always set aside some buffer for unexpected events.
Purchase a property well within your financing capabilities. It that means purchasing a RM300,000 unit rather than a RM500,000 unit, then so be it.
Do your research on the area before purchasing
You should ensure that the property meets your immediate needs like ease of transport, easy access to amenities, and so on. Properties in areas such as these should double up in time. Find out about upcoming developments in the
area. There have been countless investments gone wrong especially when investors buy into areas with little or no development potential. A good way to assume capital growth of an area is to look for famous chain F&B outlest such as Starbucks and McDonalds. These franchises tend to mushroom in areas where there is potential for population increase, hence the research they conduct on location before moving in is extensive.
If you are buying the property to rent it out, understand from the agent marketing it on who those tenants are. Many people fall victim to the ‘tenant from hell’. If you happen to open your doors to such tenants, either your property will be damaged, which would mean either you will need to fork out more money to get it back on track, or it would be difficult to collect rental from them as they will avoid you. Either way, these are headaches that you do not need.
Screen through every potential tenant before letting them in and do spot visits to the property at least once a month. It would be a good idea to personally collect rental rather than getting your tenants to bank it in to your account. This way, they will be forced to meet with you once a month.