After 31 years of renting, our client Derek* has finally purchased his own home. The constant uncertainty of rental increases and the risk of the landlord selling the property drove Derek to investigate his home loan options.
Derek’s story
Derek is a single dad renting in Brisbane with two adult children who were looking to fly the nest. For the last 23 years, Derek had put his children first which meant ensuring his income covered all his children’s needs. As there was no financial support from the mother of the children, Derek hadn’t been able to secure a home loan due to the two dependents impacting his borrowing capacity. A perpetual cycle of rent continued for 31 years.
With his daughter moving out in 2022, and his son looking to purchase his own home in 2023, the requirements for Derek to provide a roof over his children’s heads became less important. Now was the time for Derek to finally get onto the property market as a first home buyer.
Rent money is dead money
The old saying, ‘rent money is dead money’ is frustratingly true. Paying off the landlord’s home loan has become increasing stressful for renters as they are susceptible to rent increases and also the risk of being told to vacate due to the landlord needing to sell. Derek wanted housing security but also an asset to pass to the kids later on. Continuing to rent was not going to achieve that.
How Mint Equity Buyer Support Services helped Derek define his property requirements
Derek was certain on his choice to enter the property market, however, he was unsure on whether he wanted to purchase an apartment close to his work in Eagle Farm, Brisbane or if he wanted a home closer to his elderly mother in Parkridge, Brisbane.
His biggest driver was to ensure that his weekly costs were not significantly more expensive than renting.
Getting clear on wants vs needs
When we started to work with Derek on his property wants vs property needs he was quite overwhelmed with options and things to consider so we sat down with him and took a deeper dive into what was important to him, and we found:
Lifestyle keen to be walking distance to restaurants, shops and transport
Fitness is very important and a quality gym close by or in the complex is a requirement
Second bedroom or multi purpose room for his kids to stay in when required
Commute being on the same side of the river was a preference for commuting to work in Eagle Farm to reduce his travel expenses
Costs to be affordable and in-line with his current rental payments including strata levies
Rentability and short term accommodation potential in case he needs to take on a more active carer role for his elderly mum
Narrowing down the choices
Taking the above criteria into consideration, Derek decided that purchasing an apartment in the Hamilton and Newstead areas of Brisbane. This ticked the boxes of location and many buildings offer great facilities and fully functional gyms with reasonable strata levies.
Having his pre-approval already in place we knew his borrowing capacity and what kind of property he could afford allowing him to feel comfortable with the costs.
The apartment market in these areas is strong and the rental yields are high – which is great for the rentability factor if he ever needs to rent his place out in the future.
Location based credit restrictions initiated a finance revision
With these areas having plenty of lifestyle apartments, we then got to work on narrowing down what kind of apartment Derek could see himself living in.
Was a smaller apartment with a view more important than a larger property with extra space? Was he willing to forgo a balcony to have more internal space? Did he want more luxurious building facilities and was he prepared to pay more in levies for those apartments?
Derek found some properties and requested that we provide detailed property profile reports so that he could make an informed decision on a suitable offer price.
It was at this point we flagged with him that the apartments he was considering were in high density suburbs that were subject to lending restrictions.
As each lender has different policies on lending which are dependent on the suburb/postcode, size of the complex, apartment size, and type of property (ie, short term accommodation only or student accommodation) our buyer support team discussed lender options with his Mint Equity Brisbane mortgage broker.
As Derek was looking in two different locations, Mint Equity checked postcode restrictions with various lenders to ensure he was able to secure the best credit conditions for those locations. He had indicated Newstead was a preferred location, however some lenders have post code restrictions on that suburb due to the high density.
Finance revision
Now that he was clear on his purchasing goals we felt it was beneficial to revisit his pre-approval to ensure that he has finance that will support his apartment buying choice no matter the complex, size, location or layout.
We ran concurrent applications to ensure he had a pre-approval that covered both location options.
This gave Derek the flexibility to move on a property in any of his preferred locations.
Doubts raise over purchasing a property
It was at this point Derek started to get more nervous, the idea versus reality of buying an apartment had him feeling a little overwhelmed and he really didn’t understand all the costs he was up for.
On top of that, he was starting to feel unsettled and guilty about buying a bachelor pad – what happens if his adult son needs to move back in?
The personal questions were not something we could help with, but luckily his family stepped in and helped to settle his nerves and assure him that he is doing the right thing by purchasing an apartment, getting out of the rental market and building an asset that he could leave to his kids in future.
We also put together a rental market analysis for the suburbs he was interest in to provide comfort that if his income dropped, he could secure a good tenant. We discovered that Newstead and Teneriffe are both suburbs with the highest median income for Brisbane, which means that the ability of people able to afford their rental payments is higher than lower income suburbs.
Creating a budget analysis
What we could do was to help Derek understand his current spending versus his new spending with purchasing an apartment. We created a simple spreadsheet highlighting his new budget factoring in things like insurance, strata and other costs that he wasn’t used to paying.
The best news out of this was that even with purchasing his apartment, his ongoing costs were not that different to his current living expenses, and he could easily see his weekly payment requirements were affordable for him.
Getting ready to make an offer
Now the finance is sorted, his doubts settled, and he has found the apartment he wants the next hurdle… how to make an offer?
It’s no secret that it’s a real estate agent’s job to get the best deal for their vendor. This can be tricky to navigate if you are a first-time buyer.
Lucky for Derek, he had our trusty Property Buyers Guide to refer to which is filled with handy tips of how to navigate this process. We even include a best practice guide for making a written offer.
As part of our Buyer Support Services role we also assisted Derek to assemble his Property Purchase team (conveyancer and building inspector) so that he could move quickly if his offer is accepted.
Knowing what offer to make
The markets are constantly changing and in order to make an informed decision we provided him with market analysis both in the forms of property reports and real live data of sales in the area.
All of our clients receive unlimited property reports so they feel comfortable with their purchase price. These reports provide great information on the local demographics, recently sold properties, currently for sale and current rentals. They also provide an estimated value and value range based on current market activity.
A Buyer Support Services Success Story
A few offers later and Derek was able to secure his dream Brisbane Apartment in Newstead close to the Gasworks precinct. The property goals of lifestyle, location, rentability and affordability were all met.
With the added bonus of his updated weekly budget Derek can feel safe and secure in the decision he has made to purchase this property.
Congratulations Derek! The whole Mint Equity team is very happy for you!
*Client’s name has been changed to protect his privacy