For many folks, choosing a new home is a tedious decision. There are a lot of factors to decide on. Nowadays, there are more and more choices to choose from, such as condos, townhouses, duplexes, or the ubiquitous house and lot. To simplify matters a little, let's take a look into some factors that the smart homebuyer should take into consideration before deciding.
What do you need it for? Think of this very carefully. You have to decide what this is for: your home or investment. This, in turn, will help you determine the location of the property you're aiming for.
How big of a space do you need? For sure, the more spacious, the more expensive the property will be. After all, land is a scarce commodity. Are you single, a couple, any kids? Any other people living with you? See if you can be resourceful with space utilization, like using bunkbeds, or pull-out sofa beds, etc.
Location? If your main motivation for purchasing property is for business, location is very vital. Not to say that location is not important if you're purchasing property for your own residence. Nevertheless, as a property investment, choosing the location of your property can mean the difference between a gold mine and a sand pit. Let's say you would like to rent out your property to university students who come from provinces. It would make perfect sense to acquire property like apartments or condo units near universities. If your market are young urban professionals, it would be great to have rental properties that are accessible by public transport near the business district. And, if you're aiming for families, you should have apartments in nice suburban locations that are accessible to markets, shopping malls, churches and schools.
How much can you afford? Well now, we've come to the most difficult consideration of all. For some, determining how much they can afford is easy, and the decision to purchase is straightforward. For others, it's not as uncomplicated. Not many are in the know with accounting and financing. There is a lack of know-how where bank financing is concerned. Firstly, find out what the total contract price (TCP) is. Then, depending on the owner/developer, discuss how much you can shell out for down payment (D/P). Ask how long you can stretch the settlement of the down payment for 0% interest, as most owners nowadays offer such terms. As for bank financing for the remaining amount, the buyer should know of interest rates and loan periods. It needs to be stressed that the longer the payment term, the bigger the interest is.
Also, be aware that there are taxes to be paid, so make sure to ask about all of the charges that you will pay for to have an informed idea of your total borrowings and cash out. If you don't know how much you can borrow given that you can only afford to pay a certain amount each month, read up about the present value of an annuity. The same could also help you work out the monthly amortizations given a certain loan amount, interest fee, and payment term. The time value of money can also be utilized to check if going into property investments will yield a better return than other forms of investments. Of course, it is not the only tool for businessmen deciding on whether or not real estate investments are superior; they should also compute for cost of capital, return on investment, return of investment, net operating income, internal rate of return, income capitalization approach, etc. If all these sound alien to you, consult your trustworthy real estate broker.
