Buy an ugly home

Many of my clients are trying to help their kids into their first home, and I have used a variety of ways to help them do it. One thing that’s common is that younger generations don’t quite think that ‘the ugly duckling’ first home is something they will do.  Us oldies don’t encourage them to just get a foot on the ladder, so they have to live in the same, fairly ordinary, hard-to-love places that we started out in.  It’s our personal experience that the ugly duck went up eventually (quickly in this market) and we got ready to move homes, to something a little better.  Up the ladder we crawled.

Young couples are ready to do the work to make their first house into a cozy home

But I’m not into giving property advice.  I help people find the money to do it, and with 50+ lenders out there servicing the geographical area in which I work, there’s usually a way to make it happen.  This is not just a numbers job; we must be creative, even cheeky. We must love being of use to people and we must be able to find Wally.  The suitable loan is Wally, hiding in amongst the colour and noise, and it’s our job to find him.

I read some sobering figures over the Christmas break: KPMG * say that the average couple in Australia earns roughly $145000.  Even if they earn $180,000, they can only afford 12% of the housing stock out there.  Compare that to 5 years ago, when the average income was $150000 and they could afford 30% of housing stock.  It’s simply a case of buyers not having much choice.  I’ve heard it called COMO (Compromise or Miss Out) and as much as these modern acronyms bug me, the point is valid.  It seems that buying an ugly duckling that you can afford is a good idea.

I should clarify that ugly does not mean dodgy. The current market regularly sees people madly buying absolute dumps out of desperation, and sometimes it means that the buyer has to suddenly contribute more funds when the bank valuation comes in too low, and other times the buyer’s excitement turns to disappointment when they soon work out that they bought a lemon.  These are times to be ready with your finances so that you can act timely, but it’s not a time to rush your decision. 

Look out for things like what could be lurking under fresh paint and get the pre-settlement inspections included in your Contract of Sale.  They could save you more than a headache later.  Lastly, young people, please don’t plan to borrow too much. And if you come to me, be prepared that I will always try to talk you out of doing just that. Your life after getting your first home should be joyful, not achingly stressful. So, stick to the following

·         Borrow less

·         Settle for an ugly duckling

·         Do your homework

·         Be realistic.

It’s a proven strategy that’s been tested over generations.

Some ways to help your kids into a home:

1. Parental/family guarantee.

2. Sell them a house at a discounted price. The discount forms their deposit.

3. Co-purchase the property with them.

4. Loan them the funds, interest free or with interest.

5. Help their savings by having them living at home or even match their savings.

6. Trust structures: you need legal advice, but this suits some families with complex scenarios.