Archive for March, 2010

Evaluating your property purchase

March 24, 2010

When you visit a house during an open house or an appointment with your property agent, take your time. Carefully weigh up the following factors before deciding if the property that you are looking to buy is right for you:

  • Price The price is the main criterion for most of us. Learn how you can or can not afford to pay, request a mortgage pre-approved before you start viewing any properties. Perform a thorough due diligence on the price of the property and in case of buying investment property for sale, make sure that the discount offered is genuine. Perform the due diligence before you even step out to see the property to save you time on being disappointed and wasting a trip if the price des not stack up.
  • Fees Yet, even if you can pay for a property mortgage, other property costs such as property taxes and service charges could put it out of your reach. In some new areas, property taxes are lower until the facilities and services such as sidewalks, parks, fire stations and schools are built. You must have an idea of future property taxes for properties you are considering.
  • Architecture Determine if you like the style of the house. Evaluate how the house will be easy to maintain and clean. If you are buying a rental property as a buy to let investment, then make sure that the property layout and number of rooms lend themselves to providing you the maximum rental value.
  • Alterations and size Ask yourself if the interior will meet your requirements today and tomorrow. Are there enough bedrooms and bathrooms? Is there a room for a home office or game room, if necessary? The garage is about the right size? Do you need a garage at the property? Is there enough storage space?(The old houses are full of charm and can sometimes be bigger offering more storage space.
  • Lot Size Again, you should consider your current and future needs. Review the property size for its rent ability to make sure it will appeal to the type of tenants you plan to target for the rentals. If it is to be a family home then does it have enough space for a family? Or are you buying the property for occupation by single people or couples who would rather have a smaller property with a smaller garden to manage with no lawn to mow
  • Landscaping Are you looking for a property requiring minimal landscaping and hence low management or looking for a property that you intend to occupy and want the charm of spending a few weeks a year in the garden? You need to assess the type of garden to assess the costs of maintenance. Its again a question of money and time
  • Maintenance and refurbishment Are you likely to need to upgrade the heating and other utilities? Does the water supply need work? Is the roof requiring replacement soon or in the coming years? Will you need to redesign your kitchen or bathroom soon? Consider these expenses as part of the purchase price when you speak with your buy to let mortgage advisor. To assess the overall expense, you would ideally want to carry out a thorough property survey to determine the exact costs of any further work required to bring the property up to the state you want it. A full survey requires a lengthy discussion and we will not go into any lengthy detail here.
  • Extras Know exactly what is included in the price of the house and what is not. Appliances, curtains, blinds, central vacuum and air conditioners If you are in doubt, ask questions and get answers in writing.
  • General Condition Should the exterior should be repainted, does it need rendering, repairing, brickwork replacing… or any other extra work? The windows; are they safe and waterproof? Is exterior lighting sufficient? Are there any cracks in walls or floors? Does the flooring need replacing soon? Is there an alarm system? Is the water pressure sufficient? Do the hot water or cold water taps do they work properly? Is the heating system in working order? Does the property need rewiring? Check for damp, mould, signs of wood rot or any sign of wood worm, any other structural problems.

The idea is to make sure that you do thorough homework on the property and make sure that you don’t end up with any nasty surprises later down the line after the purchase!

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Property Ownership Costs

March 24, 2010

When you buy a new property to live in yourself or buying an investment property, there are a number of costs you need to consider to make sure that you can afford the overall expense of owning a new property. These costs go beyond the mortgage payment costs that you incur each month. Property ownership involves two main categories of costs:

Non-recurring costs

Some of the costs you can expect to bear during the purchase of your home:

  • Closing costs and other additional costs associated with the home. The closing costs that you pay depends partly on the size of your mortgage, the value of your property and the province where you purchase. For example you will need to consider solicitors fees, mortgage broker fees, any stamp duty that may be applicable to the purchase of your property, survey costs when applying for a mortgage, your deposit payment, property insurance and so on.
  • Moving Expenses Whether you hire property movers to pack, move and unpack your belongings or you do it yourself, it will cost you something.
    • Costs related to new home Think about what you need and everything you want to feel at home in your new home, especially if it’s your first. Then, think about what you need just to move, e.g. cleaning products. These short term costs are additive, so try to take into account the initial costs.

Recurring costs

What are the costs you can expect to pay monthly, quarterly, or sometimes every season:

  • The mortgage payment will probably be your biggest regular outgoing towards the cost of your property, whether you have a normal residential mortgage or an investment buy to let mortgage. Several factors affect the amount of mortgage that you make, including: the amount financed, term, rate, type of mortgage product and payment schedule. If you want to pay off your mortgage more quickly and reduce interest costs, you can make payments more frequently, for example bi-weekly (at the same time as your pay). Adding a little to your monthly payments or making an extra payment each year can be extremely useful.
  • Property Taxes Depending on where you are, you will receive a council tax bill that is normally paid annually. Nowadays, it is possible to pay property taxes in several ways: by writing a check to the council, by online Banking or if your council allows, automatic debit from your checking account every month.
  • Property Insurance Your lender will require that your property is insured at closing, and it is an expense that you can not avoid when you buy the property. The property insurance protects the replacement cost of the structure in case an unfortunate event occurs. Your property insurance should also cover your personal valuables: jewelry, art, furniture and computers, among others. Your property insurance should also cover liability insurance, in case someone gets hurt on your property or you damage property accidentally by a neighbor. (From time to time, make sure your coverage fits with the value of your property.)
  • Service Charges If you buy a flat or an apartment, you will undoubtedly be asked to pay a service charge for maintenance of the property inside and outside, including common shared areas used by the public. Ask before you buy all the details on these expenses, among others, from the management company..
  • Utilities Each month you will need to pay the heating bill, gas, electricity, water, telephone and cable (or satellite television).

Regular Maintenance. A well maintained property retains a higher market value and contributes to the enhancement of the neighborhood. Proper maintenance can even increase the value of your property. Sometimes these expenses are a little too easy to postpone. But if you neglect certain maintenance tasks, you will find perhaps that repair costs are much higher. A regular maintenance schedule covers a multitude of tasks from mowing to snow removal, through the roof repairs and periodic maintenance of heating system.

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