Buying your first home is an exciting milestone, but it’s one that can be difficult to navigate alone. No one’s expected to get something right the first time they try it, so why would it be different for buying property?
To help you out, we’re going to cover five common mistakes that first home buyers make in Australia. These are really common things that we see in our industry all the time.
Mistake one: Taking too much advice from mum and dad
So the first mistake is taking too much advice from mum and dad.
As horrible as that sounds, you know it’s likely that your parents bought a house in the 90s for $5,000, a pack of smokes and a can of coke, and that property is now worth an absolute fortune. That wasn’t because of their great decision making or that they really narrowed it down to a formula, it’s because they bought at a good time. It’s as simple as that.
It’s not even just mum and dad. It’s your aunties, your uncles, family members, friends. You’re sitting with them at Christmas and their advice comes out in spades.
The biggest thing that I’ve seen kill a lot of people buying their first home is dad coming through the place. They’ve got the best interest at heart, they’re not doing it to do you over, but they come through and go “look at that wall” or “the floor’s off balance”, they get the tape measure and the level out.
It’s not that they’re trying to put you off, it’s just they’re overanalysing it for you. People have their own perspective on what happens within a market.
I’ve heard it a lot from people who grew up in a regional town or a market where agents’ guide prices are super realistic. If you list it at $550,000 it’s going to sell for $550,000 or around that. Then people come to Sydney or Newcastle where the market is really competitive and mum and dad say “you never overpay for a property”.
There are different strategies for pricing. To think that you never overpay from a guide price is totally unrealistic in today’s market.
If they’re telling you to buy it for a certain price, there’s a fair chance in a competitive market it’s worth more. Back in the day when parents and grandparents were buying, it was a completely different economy.
Brad’s example: A client of mine went through a buyers agency three or four years ago. First home buyers. They loved the place, the kids loved it. The buyer agent wanted to put an offer in pre-auction. Dad said no, it’s not worth that amount, let’s take it to auction.
It went for about $70,000 more at auction. They still bought it, but dad blocked it. The buyer agent wanted to offer above the auction guide knowing it was just a guide. Dad said no, take it to auction. It went well above that in the first couple of minutes.
That’s literally an example of parents costing this client $70,000 extra.
So trust the professionals. Trust the people you’re working with. Speak to your mortgage broker for anything mortgage related. Unless your mum and dad are in the industry somehow, probably not the best people to talk to about it.
This also goes for online property forums. Most of the people in those forums are in the same situation as you, seeking advice. Take their advice with a grain of salt.
Brokers, buyers agents, financial advisors: they all offer personalised services based on your circumstances. They’re not just there to provide finance. So listen to them.
Mistake two: Keeping up with friends and overextending financially
The second common mistake is trying to keep up with friends and spending too much.
Not sitting down and figuring out what you can actually afford each week (or each month), and just picking a suburb or a type of house because all your friends have done that.
As appealing as that might be, if you can’t afford it, you can’t afford it. Do it the smart, slow way. Don’t try and skip the middle and go straight to what they’ve got now. Your first home doesn’t need to be your dream home, and it very rarely is.
They might have had generational wealth or a guarantor earlier in life. If you don’t, then you can’t make the same purchase. This comes back to psychology with ego and status driving the decision.
Buy the house you can afford now. Manufacture equity if you want, renovate, do whatever you need to do. You’ll catch up. Later on you can buy something closer to your dream home.
It all comes back to your goals. If your goal is to buy in the most premium suburb and work your whole life to pay it off, great. But if your goal is to retire in 10 years and kick back on the beach, make a plan around that.
Buy within your comfort zone so you can diversify income, invest elsewhere, and still live your life.
We saw overextending during COVID, and we’re seeing it now with the mortgage cliff. People went from 1.99% interest rates to 6.5%. Always think at a benchmark of 6%. If you can’t afford that without a buffer, you’re putting yourself in a difficult position.
Mistake three: Skipping independent pest and building reports
Another big mistake first home buyers make is not getting a pest and building report, or trusting the agent-provided one instead of getting an independent report.
We’re not saying the ones they provide are always bad, but always get your own independent report. Some building inspectors have said real estate agents don’t give them work because their reports are too thorough.
I nearly bought a house in Belmont. Waterfront view, nice street. I almost skipped it, then decided to get the report. The front of the house had sunk almost two inches. That’s hundreds of thousands of dollars.
For $500–$600, it saved me from buying that house.
Always get an inspector who is a qualified builder. This is especially important if you’re buying interstate or using buyers agents who rely on reports instead of inspecting themselves.
These things can cost you a lot of money if you don’t pick them up.
Mistake four: Copying other people’s property strategies
Another mistake is copying other people’s strategies.
You might have watched a YouTube channel or seen something online, but you need to think about your long-term goals and personal circumstances.
It might not even mean buying a house to live in. It could be rentvesting. Ask yourself what you actually want.
I had an example recently: a doctor moving to an area with stable but not high growth. His mum told him not to buy there and to chase growth elsewhere. His budget was $500,000.
By buying where he works, he could use stamp duty exemptions, rent rooms, build equity, depreciate the asset and turn it into an investment later. That’s personal strategy, not generic advice.
Don’t just think “I need to buy a house”. Think about the whole situation.
Mistake five: Waiting for the market or trying to outsave it
This is the big one. People try to wait for conditions to get better or outsave the market.
I had a first home buyer this week. His capacity was $750,000. He wanted to buy at $850,000. He said he’d keep saving.
Saving $500 a week for a year won’t close that gap. Meanwhile, that $750,000 property could go up 10% – that’s $75,000, taking it up to $825,000. While he was saving $100,000, he needed $175,000.
We’ve seen this in every boom: 2014, 2017, 2019, 2021. People wait, then rates drop or conditions change and prices run away.
If you’re ready to buy at a certain price now, buy at that price now. Capital growth will outweigh savings three or four times over. Your income will grow, your borrowing capacity will increase, life will change.
Whether you buy to live in or rentvest comes back to personal circumstances and lifestyle. If you hate renting, buy an owner-occupied property. If investment is your focus, rentvest.
There’s no perfect answer – just the right answer for you.