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Buying Tips for Newcomers
Saturday, July 10, 2016

So, finally decided to make a big move or still contemplating whether to take a step forward or not? For any newcomer, this moment is quite bemusing as it is for the very first time that you are going to invest your hard earned money in something that you haven’t done ever before. There are so many things you think about when you want to make the big move of buying your own house. Be it buying a 1-bedroom, 2-bedroom, duplex, penthouse or a bungalow, it’s always a big decision. You may be planning for this since very long time back but there is great scope of complexity which you are going to face now. Suddenly you will start comparing several parameters at different level.

Every buyer goes through series of questions and to find answers, they have to look at multiple websites, blogs and do a lot of research. There is never a single document which talks about all the facets of buying a property. So today, I’m going to try put all the steps required based on my experiences.

I have been lucky enough to have a chance to experience buying multiple properties, as an investment as well as buying a house to stay in. So, to help save the frustration first time buyers go through, I’m going to try to jot down all the points a buyer might think of before making the big decision.

Before any other questions arise, the most important thing to remember is the reason to buy a property. What are the motivation factors to buy a property?

  • House to stay in
  • Investment
  • Probably both
  • Let’s try drilling down for all of those options.
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    If you are buying as an investment,

  • How much are you willing to invest
  • Are you taking any loans?
  • What kind of returns are you expecting?
  • How long can you stay invested to get your returns?
  • Can you afford to book a loss?
  • What’s your primary investment goal? Capital appreciation or rental yield? If both of them which one is more important

Buying a house to stay in,

How long do you plan to stay there?

How is your job, source of income, do you see a steady cash flow for at least few years?

Changes that might happen in future (marriage, have kids, dependent parents moving in with you, in an unfortunate case death of loved one, divorce)

Both (first investment and then some day you plan to stay there or vice versa),

In addition to above points

Where are you staying right now, with parents, siblings, in a rental home, in company paid accommodation as you are in a transferable job?

Define your tentative time line for each activity

Ok, so now you have already decided why to buy and have already answered the above questions, next question will be as to what kind of property – under construction or second sale.

Each have their own pros and cons and everyone person has to weight what is more important for them. An under construction property will be a brand new house and you can get the interiors done as you like without having to demolish anything. But that mean after you pay your initial amount, there can be a long wait. You will start paying your EMI much in advance to actually staying in the house. Some people are ok to do so if they already have a house to stay in or live with your parents or siblings. But if you are renting out your current place, then it can get very expensive as you will be paying rent as well as EMI.

On the flip side, a second sale house might be difficult to find as you will want to find a house which is done to your liking. It’s not impossible but it does take a lot of time and effort. When I bought my house, I couldn’t afford paying a rent and EMI, so I decided to buy a second sale property. It did take me 5-6 months to find a house but when I did, it was perfect. I could move in immediately once the paperwork was done.

Be it a first time buyer or a savvy buyer, every buyer has to go through different stages in their buyer’s journey. Let’s dive a little deeper to understand what to expect at every stage.

Initial iterative stage:

At this stage you are really not sure what kind of property you really want and how much money would you need for it

You spend at least 60-70 % of the property hunting time in this stage.

Money Matters: You don’t have an exact idea how much this property is going to cost and can you manage that money? Note: You will need at least 20-25 % of the property value in cash

Selecting a Size/Type/Design: Deciding between 2 bedroom or 3 bedrooms, penthouse or duplex

Selecting a Locality: Ask these questions to yourself. How well do you know the locality? How know it well? Is it convenient? Proximity to your lifestyle needs (night life, malls, nature parks, medical facilities, grocery stores)

Selecting a Project: Are you fascinated by a particular condo or a complex? Have you got a particular size you are looking for, what are the amenities required?

Selecting a Unit: what view are you comfortable with? Garden, swimming pool, parking lots, another building, etc., any religious spiritual things involved. Does it need to be east / north facing, fengshui, vastu shastra, condition of the unit. Amount of repair work.

You will go through this stage multiple times until you have found the right property. This iterative stage stops only when you have identified the property. But remember to use a top down approach – identify budget, then size type, the locality, the project and finally unit.

After this comes the closing stage.

You have identified the property, more or less comfortable with money matter and actively reaching final agreement with the seller.

Before you start negotiating, make sure you have done a thorough research on the market price. Also, check what price the other units were sold at. This will help you get a fair understanding of what the seller might be expecting.

If the house you are buying is for investment, then also find out the rent the house would fetch. Check if the rent can pay off the EMI or you need to top up.

With this, also make sure you find out the maintenance fees and sinking fund if any.

    Lastly, with all the above done, doing the paper work:

  • Token amount
  • Black/White part of the deal
  • Registration
  • Final settlement
  • Possession

This can be a little tricky as there is a lot of paperwork to do, lot of legal matters to take care of. It is advisable to get professional help if you are buying a property for the first time. Without prior knowledge of real estate, buyers get bogged down and don’t really know if they are doing the right thing. So to be stress free and to make sure that all the paper work is correct before moving into the new house, get yourself a property advisor who will not only help you find property, negotiate but also help with get the right paper work done for your dream house.

Depending on where and how you are buying, these points might defer. But the overall stages will remain the same in every buyer’s life. Hope this article help you make the right choices and happy shopping!