It’s hard to believe that $900,000 doesn’t buy much!

It’s hard to believe that $900,000 doesn’t buy much!

Juliet was buying in a very desirable part of Sydney in a hot market and even though she had a healthy budget, it wasn’t quite enough to get her what she wanted.  It’s tough when your budget is borderline, as so many properties look tantalisingly within your reach but someone with deeper pockets can very easily make them unaffordable.  It can be heartbreaking to keep turning up to auction after having spent money on building inspections and conveyancing to keep missing out by only a small amount of money.

The options open to you are to change location or accept a property with sufficient compromises. But you need to be aware that the second option can affect long term capital growth.  When buying an investment you can be less fussy with regards to location but when you are buying a place to call home, the suburb choice becomes so much more important.

From an investment point of view, the focus is usually very much on future capital growth.  

Owner occupiers pay less attention to this – but I personally believe they should consider this aspect more than they often do.  You see, by making location the number one criteria, the property’s attributes become the things that have to give.  But a property in a great location with loads of negative features will most likely grow in value at a slower rate than a better property in a lesser location.

Some of the compromises that owner occupiers will make to be in their desired suburb include:

  • buying on a main road,
  • an architectural style that is out of keeping with the area,
  • a smaller or odd-shaped block of land,
  • an unappealing outlook,
  • lack of natural light,
  • lack of privacy,
  • a smaller home (like one less bedroom than they could afford elsewhere)
  • no parking
  • less renovated
  • next to a pub, electrical substation or a petrol station, for example.

Some of these compromises will affect future capital growth more than others. For instance, being next to an electrical substation would be a deal breaker in my view, since you can never overcome this negative. On the other hand, a home where the neighbours look right in may be able to be improved by some clever landscaping.

After looking at all the houses we showed her, Juliet decided that Leichhardt was the suburb that she wanted to be in.  Yet the house had the most compromises of the lot!  The main one I was concerned about when considering resale value was that the second bedroom is tiny because of the staircase placement.  This did not affect Juliet as she could see that the room layout suited her perfectly as she would mostly be using it as a home office and the balcony it offered was a real bonus.  However for other buyers who want a more typical second bedroom, this would be a deal breaker.

Juliet bought that house – but with her eyes well and truly wide open.  I could see that it would suit her needs but I also wanted her to be aware that other buyers would not view it so positively.  After inspecting it another two times and spending time hanging out in cafes and shops in the area, Juliet decided that she felt right at home in Leichhardt and was completely in love with the house.  And ultimately it was the most affordable of all four properties, so she had the added benefit of a smaller mortgage!

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