When buying a property – whether an investment, or home (especially your first home), the price that you can afford to pay does not necessarily just come down to the price tag and what a bank will lend you. It also comes down to your ongoing costs, which can vary hugely depending on your choice of purchase.
Lets take for example, 2 (imaginary) houses for sale. Both offer 3 bedrooms, 2 bathrooms and parking for 2 cars. Both can be bought for $500,000 and both are within a kilometre of each other, so similar school catchments, commutes etc.
Our first variation is often insurance. Depending on the location, (and yes, 1km can make a difference. Even 100m can make a difference!), insurance between two properties of the same nominal value can range by hundreds if not thousands of dollars per year with building materials, age of home and flood mapping playing some of the biggest parts in this. Modern, block home in an elevated street – easy. Older, timber home in much of the inner ring of Cairns? Well, where the former might be $1500-$2000 a year, the latter could be $4000, $5000 or more depending on your choice of insurer. That could be an extra $60 per week (forever) to be looking for. This isn’t to say there isn’t good value in that kind of home (and certainly, we have seen some excellent capital growth in this kind of area over the past few years), but its definitely something to keep in mind, particularly when looking at the top of your budget.
Beyond insurance, there is of course going to be differences in maintenance and repair costs from one home to the next. Brick, block or timber construction, tin, tile or colourbond roof, all will have a different bearing on how much you might need to set aside each year to keep on top of things, and how often items will need to be replaced. You might find that your budget gets you a smaller, more modern home or something larger but closer to needing TLC. If low maintenance and low cost is your goal, then the smaller home might be the one for you. On the other hand, if you are looking to expand or find more potential upside down the track, then elbow room and elbow grease might be more for you.
As always with property, do your homework, get advice from an expert and ideally, get around the difference in these costs BEFORE you buy, to keep the surprises pleasant on the other side.