Cashflow & Budgeting,Investing,Personal Finance,Property

The Hidden Cost Of Changing Your Address

2 Dec , 2014  

Rebecca Jarrett-Dalton

Rebecca Jarrett-Dalton

Credit Adviser at Two Red Shoes
She doesn't wear a suit but she owns fabulous shoes. It shows as she is the owner of 'Two Red Shoes' a premier mortgage broking firm servicing greater Sydney. Not a typical name for a mortgage broking firm as she wants you to know you are dealing with a different kind of mortgage broker.
Rebecca Jarrett-Dalton

There’s a very good reason for trying to buy the best, most suitable property that you can afford to buy – suitable for you now and suitable for you in the short to medium term future. Money. It costs a lot to change address, and I’m not talking mail redirection fees!

Imagine this example:

Young couple, quite certain there are no immediate kid plans, buy a gorgeous 2 bedroom apartment in Dee Why for $450,000

Fast forward a year or two and there’s a baby in the other bedroom and an accumulation of all things necessary to support an infant completely filling the rest of the place, you know this story.

So, we’re now selling a gorgeous apartment for $520,000 and upgrading to a lovely home – a Northern Beaches bargain at $700,000.

Here’s the killer: it’s going to cost them $50,000 for the exercise. That’s a lot of money you don’t get back and it’s eaten up in things like real estate agent fees, stamp duty and solicitor costs.

The Breakdown:

Sale price $520,000
Real Estate agents fees $17,160
Solicitor $1,200
Sundry other bits and pieces $800
New place $700,000
Stamp duty and government charges $28,211
Solicitor $1,500
Pest and Building inspections $500
Sundry other bits and pieces $1,000
Total lost in changeover costs $50,371

Imagine doing this a few times over, sure starts to add up.

NOTE: while this still applies to a degree to an investment property it’s more particularly about your own home, which involves heart and emotions and frustration – an investment is all about the numbers and if the numbers work, it works, no need to change over.

So how can you avoid this?

1) Buy the most suitable property you can afford, to suit your needs now and allow for growth, ideally a property should suit you for, say, 5 to 10 years to justify the stamp duty you pay going in.

2) Can you fit a trampoline or a swing set in the backyard or are you past this stage?

3) Research your suburbs well. The biggest thing you can’t change about your home is it’s location. Visit the local shops and parks, other places you like to hang out. Check out the traffic at different times of the day. Drive / commute to work from there – at your normal start time. Visit the local schools if you’ve already started your family. Are you committed to activities in one location – are you going to spend all of your time travelling back out of the new suburb?

4) Is this property a stepping stone to your next home – can it be setup now as a future investment property? (The answer to this is yes – ask me how to do this that bit better.)

5) Have that frank conversation about the future – in absence of a crystal ball the closest you’re going to get to predicting the next 5 years is that honest conversation.

Back to our couple in question, there was no question of not moving – with a toddler in the front room and twins on the way – so much for no kids huh!

If you are thinking about entering the property market or upgrading your current home, be sure to have a chat with Rebecca. As an experienced credit advisor and property investor herself she has the expertise to point you in the right direction. Get your mortgage questions answered by her today! Click below, it is that easy!

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