Mistakes when buying real estate – Buying your own home for the first time can be overwhelming. Mistakes creep in again and again gladly into the purchase process of a real estate. Whether a bad location of the property, reasons against self-interest or a purchase out of emotion – mistakes cost you a lot of money. To make sure you get through the buying process of your first property safely, and to avoid all mistakes, we have put together a guide for you, with which you are guaranteed never to make another mistake when buying your next property.
Mistake 1 – The location is decisive
A property in a poor location without high demand quickly becomes a problem. Therefore, one should always buy in an attractive location.
Property in a bad location:
Germany - Spain - USA
- Low demand
- Renting becomes difficult
- Consequence: Vacancy
Therefore our tip: Pay attention to A- B- and C- layers!
Real estate in good location:
- Buying in large cities (not metropolises in top A locations), example Bonn or Leipzig
- Conurbations, the famous Speckgürtel, with good B-location like everything around Munich, Darmstadt near Frankfurt
- B-location cities in demand, such as Kassel, Braunschweig or Heidelberg
Mistake 2 – A property that is too specific
Special real estate requires a special group of buyers – and this group is not easy to find. That’s why you should always go for real estate whose utility and use covers the needs of the broad masses. In our article on real estate types you can learn everything about apartment, house and co. So what are you looking for on the real estate market?
So what’s there to keep your hands off of?
- Loft/ Villa/ Apartment, everything that exceeds the normal consumer
- This type of property must be in a top A location in order to sell/rent it.
Our tip: 1-2 room apartment
In all locations, be it A, B, or even C, 1-2 room apartments can be found and the demand is constantly increasing. Since more and more people live alone, a look at the single apartments is always worthwhile.
An example of a special property in C- location: hard to sell.
Mistake 3 – Self-interest instead of investment
You can read a lot about owner-occupation in our article on the subject. Here you will learn again in a nutshell why it is not advisable to use your first property for personal use. Therefore, our tip: Do not buy an owner-occupied property without capital investment, because you are responsible for 100% of the operating costs, neither tenants nor the tax office comes to your financial aid.
Reasons against self-interest
- Self-interest is the most expensive way to live
- One will never be completely rent free due to ongoing costs
- You pay off the property yourself
- Self-interest reduces credit rating
- Property is not suitable for old age later
Mistake 4 – A house as a first property
If you choose a house as your first property, you must also be aware that this means that you will have to bear 100% of the costs. Therefore our tip: Buy a condominium as your first property.
Condominium: Cost allocation made easy
As soon as you acquire an apartment in a multi-party building as your property, you become part of a community of owners. Thus, all running costs incurred for repair, maintenance and modernization are divided among all parties of the house.
Here is a small example:
- Homeowner (100%): 12,000 euros
- 4-party house (25%): 3,000 euros (-9,000 euros)
- 8-apartment house (12.5%): 1,500 euros (-10,500 euros)
Mistake 5 – Let the emotions flow in
Real estate should always be viewed rationally instead of emotionally. Therefore, our tip: Never buy a property out of emotion. Even if you find the property at first sight insanely beautiful, think again well about it. Often such buildings are due to the year of construction and the condition dilapidated or in need of modernization, whereby for you in the end much more costs than actually jump out.
So what should you do?
- Avoid impulse buying!
- Testing at commercial and technical level
- Examination of yield, purchase and resale value
A typical property that is bought out of emotion: A lot of charm, little profit.
Mistake 6 – No attention to resale value
A really great purchase price! – And now? How much do you get out of it in the end? Many people don’t pay attention to the resale price when buying a property, but you definitely should!
The decisive factors for the resale value are:
- Property type
- Location of the property (see return or investment)
Comparison: location and increase in value
Let’s compare the 3 types of location and the increase in value:
- A- location: value increase at 4-6% per year
- B- location: value increase at 1-2% per year
- C- location: no increase in value
As a beginner, they opt for a condominium in a good C- location or B- location.
Mistake 7 – Top equipment- bad property
Great kitchen, great furniture, you bought the property only because of its great equipment? That’s bad for you, because you’ll make less profit. What you are looking for are properties in need of renovation, because this way you can renovate them yourself and then sell them, making a profit.
Mistake 8 – Paying in huge installments
You want to pay off your loan as quickly as possible and think large sums will help you? Unfortunately, this is wrong. Here’s our tip: It’s better to agree on small repayment installments with the bank.
- The tenant pays off the property, all surpluses are direct asset accumulation
- Inflation reduces the loan for a long time
- The higher you set the repayment, the less is left at the end of the month
- The faster a property brings cash flow, the higher the surplus
Next step: criteria to the condominium
The property for first-time buyers. Want to buy a condo as your first property, but don’t know where to start? Here we’ve created a checklist of 11 items for you to determine the basics and criteria of your real estate search. Whether determining the maximum purchase price, the question of owner-occupancy or capital investment, yield or investment property as well as existing or new construction – here you will get all the answers to your questions.
Owner-occupation vs. real estate as an investment: advantages and disadvantages of owning a home
The dream of owning a home is a goal that many people have in mind. But does it make sense to choose a house for personal use as the first type of property? Or is it not perhaps more sensible to use the first property as an investment? Living rent-free in old age will never quite come true, even with a home of your own, because you are always 100% responsible for all running costs. Therefore, in this article you will find a comparison between owner-occupancy and a property as an investment, which should help you make the decision to use your first property.