When it comes to property, everyone has an opinion. Senior economists share a diverse range of views, stating that the Australian property market is either two seconds from going bust or beginning a climb that will see us become one of the most prestige property markets in the world.
I don’t buy into any of these opinions (pardon the pun). If I did, I doubt I would have ever purchased my current home out of pure fear, loathing and paranoia for what the future may hold.
All the while, we forget an important part of life - the concept of ‘living’ and doing what we actually want to do. John Lennon said it beautifully when he stated ‘life is what happens to you while you’re busy making other plans’.
This is where I changed my outlook on property. I realised that if I ever wanted to realise a dream, a dream of owning my own home, living where I wanted to live and no longer paying other peoples mortgages while I sat on the fence, I would have to make a decision.
My decision was to view property in a new light. I would look at my home as a pleasure of living, an investment second (whilst doing the best I could to ensure I didn’t make a bad investment). Seeing a home as purely an investment means an endless concern for value, markets and whether or not you will do your money.
More: Debt Man's view: Buying vs renting
How did I change my view on property?
I disregarded the naysayers and reminded myself that life is short. I realised that I would rather look back and potentially regret my implemented actions, rather than my inability to do anything at all.
I also reminded myself that there are numerous options available to me should my circumstances change or the property market drop for that matter.
The options include
Renting out your property if needed
Besides the tax benefits of negative gearing a rental property (which are fantastic in my opinion), I realised that regardless of property prices, the demand for rentals is continuing to grow. I could always rest easy knowing that if I could not ascertain an appropriate sale price, I could rent the house out. The benefits would be two fold; extra income to pay the mortgage and a substantial tax reduction through the process of negative gearing. All the while, I would be working towards the ownership of a substantial asset.
If you love your home, does the value really matter?
If I didn’t need to sell, regardless of the property market falling or rising, it would still be a home that I own and love living in. This is why it is crucial to attempt to future proof your purchase by thinking whether or not the house and area you are buying into is a place you could foresee yourself living in over the longer term.
Every little thing you do adds value
Fixing the gardens, improving the kitchen, painting the house, these are all things that would steadily add value to the property, meaning it is possible for an owner to help the value of their property without relying simply on external factors in the market.
As the boring economists say, ‘you only realise a loss when you sell’
Fingers crossed I never have to sell on short notice, though the idea of losing money on property is only realised once it comes time to sell. The right mixture of picking when you sell and hopefully having the ability to hold (whether it be living in the property or renting it out) would mean a loss would not get realised for as long as possible (if at all).
So is buying a house a crazy financial decision?
The answer is that no one will ever know. Markets go up and down, as does consumer demand in general. Though what I do know is that buying a house is a very personal decision. It requires more inner thought than most people realise.
For me, it definitely wasn’t a dumb financial decision. It got me into the real estate market in a house that is future proofed against my short to medium term goals; it also brings me a level of comfort and protection that I have always wanted. I was able to feel comfortable with this largely because of my numerous backup measures in place should my decision to purchase end up causing me trouble.
Where do you sit when it comes to buying a house? Smart financial decision or not? What other measures can you put in place to safe guard your property purchase?
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