• How do I know what kind of buyer I am?

    How do I know what kind of buyer I am?

    For most millennials, getting on the property ladder is high on life’s “to-do” list, but why, exactly?

    Neil Harlock, a RAMS Home Loan Specialist from Canberra, says while many young Aussies intrinsically know they want to buy property, they often don’t consider the “why” part. Neil says “would-be buyers need to work out what kind of buyer they are, because that could ultimately drive their property journey.”

    “What do you want out of a property? Do you see it purely as an investment? Or is it about finding a dream home where you can raise a family?” Neil asks. “What kind of buyer are you? It’s a very important thing to understand,” he adds.

    “The type of buyer you are impacts on every part of buying property; from the property search to the type of loan you could get and how much you could borrow, right through to what government grants and stamp duty exemptions you might be entitled to and even how much tax you may be required to pay,” Neil says.

    A myriad of factors influence what kind of buyer a person is. “Affordability, wants and needs, the market, the expected norm amongst friends and family, their life stage and relationship status are just a few,” Neil says.

    How do I know what kind of buyer I am_Pic1 - chairs on verandah 
    First-time buyers can fall into a range of different categories, with varied property goals. Picture: realestate.com.au/buy

    A good Home Loan Specialist can help you work out what kind of buyer you are, Neil says, and explain the pros and cons of each. “We get to know the customer and discuss things like short, medium and long-term goals for their property interests.”

    First-time buyers generally fall into one of four categories:  

    • not-quite first home owner
    • forever home seeker
    • lifestyle lover
    • long-term investor 

    Let’s take a closer look at these buyer types, and some of the best property paths to pursue for each. 

    1.     Not-quite first home owner

    This buyer is desperate to get into the market and wants to live in their own place.

    “They’ve got an old-fashioned ‘glory box’ of homewares under their bed, but they’re not quite ready to use them. They have the drive and discipline to save, but haven’t reached their savings goals yet,” Neil says.

    “This type of buyer is conscious of the market getting further out of reach,” Neil adds. Sound familiar?

    “For this type of buyer, buying off-the-plan could be a good option, because it enables you to get into the market, but potentially at a lower price point and with time to continue saving as the property is built,” Neil says.

    Bonnie Caine – a 29-year-old who purchased a one-bed off-the-plan apartment in Sydney’s Sutherland Shire in July 2014 for just under $600,000 – is a perfect example.

    Bonnie, who up until recently shared with four others in Balmain, knew from a young age she wanted to own her own home and “just wanted to get into the market somehow”.

    She saved her 5% deposit by working long hours for several years, doing three jobs, sometimes seven days a week.

    “In a pricey market like Sydney, buying off-the-plan made sense,” she says.

    “While it’s strange to hand over this big deposit and effectively get nothing back for it immediately, buying off-the-plan has been a good choice for me. I’ve heard reports my place could be worth close to $700,000 already and the build has only just been completed, which is just amazing.”

    2.     Forever home seeker

    How do I know what kind of buyer I am_Pic2 - living room

    Are you patiently waiting for the ‘right’ home or keen to get into the property playing field? Picture: realestate.com.au/buy

    The ‘forever home seeker” is careful with their money because they want that beautiful home one day; a forever home.

    “This buyer is patiently saving and would rather wait for the right property than jump the gun, just to get a foot on the ladder,” Neil says. “They want somewhere they can build a home and a maybe even start a family in,” he says.

    This type of buyer focuses on becoming an owner/occupier. “When you’ve waited and saved, it’s OK for emotion to come into play, because it’s somewhere you’re going to live, at least for a while,” Neil says.

    Natalie Viset, a 29-year-old Sydneysider who lives with three friends and has been saving for her first home for five years, is a textbook “forever home seeker.”

    Natalie, who produces TV ads for a living, saves a set amount each month so that she can afford a home in the future.

    “I like the idea of having a place I can call home; my money that I earn is paying for my future and my family’s future, rather than going into someone else’s back account,” she says. “I’ll just keep saving.”

    3.     The lifestyle lover

    The ‘lifestyle lover’ is young, ambitious and unwilling to give up their inner-city lifestyle for a house in the ‘burbs, just to get on the ladder.

    “This type of buyer knows they can’t afford to buy the trendy warehouse conversion they rent, but they’re savvy enough to know they should get into the market, so explore other avenues,” Neil says.

    How do I know what kind of buyer I am_Pic3 - cafe and people 
    Would you give up living in your own home for a vibrant inner-city lifestyle? Picture: Industry Beans

    The answer? Rent-vesting, which involves buying an investment property in a cheaper location and renting a home elsewhere to live in.

    It’s a concept Taku Ekanayake, a 29-year-old finance broker from Sydney, is familiar with. After setting out to buy a “home to live in” in Sydney, Taku switched track to rent-vesting and now owns six tenanted properties, living “where he wants” in rented accommodation.

    “I was very committed to getting onto the property ladder and after researching, I came across the idea of buying an investment property, rather than a home first. The numbers were more appealing to my position in life,” he says.

    Neil says there could be tax and other financial implications with this approach, so research and seeking professional advice is key.

    Read more: Here’s how your first property could be your forever home

    4.     The long-term investor

    When the ‘long-term investor’ looks at a property, they don’t see a home, they see dollar signs.

    “They’re most concerned with building a portfolio of investments for their financial future than they are with having a fancy roof over their heads in the immediate term,” Neil says.

    Crunching numbers and understanding the market are key for this type of buyer, Neil adds. “Investing and using equity to build out a property portfolio is increasingly popular, but it is complex and requires an understanding and expert advice.”

     

    Originally published on flatmates.com.au

     

    About the author

    • Raymond

      Raymond A Ram is the RAMbassador for RAMS Financial Group. Raymond works with the RAMS team to bring simple, helpful and expert information on home loans and savings accounts to life with his down to earth and cheeky personality. He enjoys seeing everyday Australians turn their dreams of saving for a goal or getting into a home a reality. 

      Growing up in Goulburn, NSW, Raymond was brought up with good old-fashioned Aussie values of hard work and a fair go. It soon became apparent that Raymond wasn't content for the conventional path of grazing, producing the very best wool, and finding a nice sheep to settle down with. So it wasn't long before his passion for performing and his talent as a likeable larrikin shone through - landing him a few roles such as 'RAMlet'. He was even tipped to play RAM-bo at one point but chose to become star of the small screen instead as RAMbassador for RAMS. He now finds this role so much more rewarding.

      Contact your local RAMS Home Loan Centre about your home loan options.

      Raymond A Ram
     

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    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.

    The views and opinions expressed in this article are those of the author alone and do not necessarily represent the views or opinions of RAMS Financial Group Pty Ltd ABN 30 105 207 538 (RAMS),  Westpac Banking Corporation ABN 33 007 457 141 (Westpac) or their related bodies corporate. This article is strictly for information purposes only and neither RAMS, Westpac nor any of their related bodies corporate make any representation as to the accuracy or completeness of the information in this article or endorse the views expressed in it.