Are you dreaming of a second living space or a bigger yard with room for a pool? Or perhaps there’s a school zone you covet or a train station you’d like to have within walking distance. Maybe you’re relocating for work or looking for more room to work from home?
Buyers’ advocate Miriam Sandkuhler, CEO of Property Mavens and author of Property Prosperity, says chasing more space for the kids is the number one driver for upgrading, but whatever your motivation, here’s a checklist to make sure your next move is memorable for all the right reasons.
Sandkuhler says the first thing upgraders should do is a needs analysis.
“You need to understand the lifestyle objectives you’re wanting to achieve,” she explains. “What type of property are you looking for and what type of location will correlate with your budget?”
Peter Locandro, managing partner at accounting and wealth advisory group Chan & Naylor in Melbourne, says affordability should be front of mind when upsizing, along with having a buffer for unexpected expenses.
Keeping in mind that kids cost more the older they get, Locandro encourages upsizers to think past year one and avoid spending “top dollar”.
You can use an online borrowing calculator to help determine how much you can borrow.
This comes down to an individual’s risk profile, says Sandkuhler, which means if you’re a worrier, you may prefer to sell first.
“As a general rule of thumb, it’s best to buy first in a rising market, and sell first in a declining market,” she says. To figure out which way the market is headed, monitor the price increases and days-on-market of the types of property you’re interested in and pay attention to the media and to reports like the Commonwealth Bank’s quarterly State of the States report.
“There’s usually clear indication when certain suburbs with certain property types are rising [in value],” Sandkuhler says.
If you plan to buy first, you may need a bridging loan – what CommBank describes as a short-term facility covering the financial gap between the purchase of your new property and the sale of your current property. These loans have a maximum loan term of 12 months so you’ll need to sell and settle your current property within this timeframe.
You can book an appointment with a home lending specialist to find out which options are most suitable for you.
There is a whole heap of expenses that come with buying and selling property and you’ll want to calculate these at the outset, before you fall in love with your dream home.
Apart from bridging finance, you may also need to cover real estate agent fees, buyers’ agent fees, sales and marketing costs, stamp duty, loan fees, moving costs and utility connections at your new property.
Locandro says you also need to consider the costs of furnishing and maintaining a larger home.
“Most people never factor that in,” he says. “I think many people overcommit or overspend and that can cause issues, so remember to factor in the big picture.”
You’ll also need to factor in the costs of any repairs, renovations or upgrades your new property requires. More buyers than ever are looking for a home with sustainable features. With that in mind, CommBank has launched a Green Loan to help customers buy renewable technology.
It’s a good idea to get input from your accountant before you make any life-changing financial decisions, especially if you plan to hold onto your existing home and turn it into an investment property after moving into your new property.
“It’s really important to talk to your accountant first around what the tax implications are if [you] keep [your current home], and if you’re borrowing money to upgrade,” says Sandkuhler.
Locandro says he often gets questions after clients have upgraded, when it may be too late to put optimal structures in place.
“You should be getting advice from an accountant who is a property expert because there’s things you need to do, or at least be aware of, when you’re making those decisions,” he says.