Three things I wish I'd known before I bought an apartment
I spent most of my 20s assuming that I'd buy a house, oh, sometime around... never. But when the clock struck 30, I got some financial advice and the reality came into sharp focus. With a small deposit and enough coin to cover monthly mortgage repayments (which weren't much more than my rent) it actually was achievable. The catch was I'd have to move out of my comfort zone, away from family and friends, to do it.
At the time I was looking, outer beachside suburbs of Mordialloc, Edithvale and Aspendale in Melbourne's south east were still flying under the radar. I made an offer on an apartment that was up for sale in a small block of six in January, 2014. I locked it in after a brief haggling period.
In hindsight, doing the deal was the easy bit. The first 12 months were bloody hard. Here are the things I wish I'd known before I'd bought. Armed with this info, the transition would have been a hell of a lot easier.
If you want something done, join the owners' coporation committee
You never really know what you've bought until you're living in it. My block was in pretty good shape, but it had been neglected a bit. The owners' corporation fees were really reasonable – just a few hundred dollars a quarter. But that didn't leave enough of a buffer to do much more than replace a rusty clothesline and keep up general maintenance, like lawn mowing. We needed a new fence and some larger jobs done to keep the place looking snazzy.
I joined the owners' corporation and worked with other owners to set the agenda. I had a lot to learn about what was involved. For starters, we agreed to put the quarterly fees up so we had the funds to complete work. It was already hard enough to fork out for the mortgage each month, paying owners' corp fees on top of that really hurt some months, I wish I'd had more in my back pocket to cover this. Plus, I spent a lot of time talking to the other owners and the property manager to assess quotes and make sure we smart with our money. Some weeks this felt like a full time job. But now we're happy with the results and it's ticking along nicely.
Rates: your annual pain in the arse
I knew council rates were going to hit hard. But I was already shelling out for repayments, owners' corp fees and trying to leave enough for the odd wine with mates. So when I received my first rates notice, I promptly ignored it, seeing that the full amount wasn't due until February the following year. There is an option to pay quarterly, but naturally I didn't do that. I opted instead to worry about it later.
Don't be me. Pay your rates quarterly, otherwise the month you pay your mortgage and your rates (which were circa $1200 in my case), you're living on tinned tuna and spending a lot of time at home because you can't afford to go anywhere.
It's not hard forever
Here's the good bit. It got easier. Once I found my groove, I started putting away a bit of extra cash each month. When I had enough in the bank, I started looking for rental properties in the suburbs I wanted to live in, closer to work and my social network. I nabbed a great two-bedroom house and found a tenant for my apartment.
When I moved, I arranged to get a housemate, so my rent became cheap(ish) and my tenant covered most of my mortgage. This also meant I could start negative gearing my investment, which has heaps to tax benefits. So, I still pay the balance of the mortgage not covered by rent as well as water and rates, but now they're tax deductible.
While our folks bought homes and lived in them for long stretches, that's not going to work for many of us. The key is to find a way into the market and getting your property to work for you.