When it comes to buying a property you want to be sure of long-term success. After all, your first home is a massive commitment not only for now, but for in the years to come.
It might make sense then to turn to people you trust with proven long term results in their personal property purchase, your parents.
There are many reasons that first homebuyers in Australia are looking to Mum and Dad for property and lending advice.
Usually the place we get our first ever money advice is at home, from our parents. Pocket money, savings accounts, budgets and financially planning strategies are all laid out at home at a very early age. It’s logical then that when it comes to the biggest financial decision in our lives, we go back to our original source of information.
Financially many parents assist their adult kids in making that first home down payment. Their contribution makes buying your first ever home affordable and gives you more elbow room in the market. It seems fair then to give them a say in where and what you purchase. Some parents may even set terms down that they must get a say in the property purchase in exchange for their part of the payment.
The advice your parents give is simple and easy to follow. There are no complexities or overwhelming slabs of data to wade though. The solution is clear and straightforward. When it comes to a big purchase like buying your first home, nothing is more off putting or demotivating than a lack of certainty or clarity.
Personally, you know they have your best interests at heart. While professionals can give you expert advice, it can be geared towards them making money; it is their business after all to get the best outcome for themselves. Mum and Dad however are only in it for you and your future.
Your parents made a solid investment that has proven dividends now that the home is paid off and worth greatly more than what they paid for it. They live a comfortable life and were able to achieve so much financially. How could their advice possibly go wrong?
That is why a recent survey by finder.com.au showed that more than any other source, first home buyers valued their parents advice on where to buy, who to lend from and what property type to purchase.
In fact, one in four first homebuyers go to Mum and Dad for advice over any other source, trumping individual research and professional opinion.
Closely following the 25 per cent of people who go to their parents for help, 21 percent of first homebuyers carry out their own research.
Only 16 percent look to a professional source, like a financial advisor. The other 38 percent were comprised almost evenly between comparison sites, friends, banks, online forums and real estate agents with a small 2 percent looking to a lawyer or accountant for advice.
Unfortunately, while advice from parents might be most popular, it can sometimes not be the best. While they have their heart in the right place, the investment your parents made was probably decades ago. Markets have changed, cities have grown and even the reason for purchasing a first home is markedly different from their original decisions.
Suburbs that once were cheap buying options have now become booming investment successes, driving prices up to the point that a solid return or profit is not guaranteed in the future. While there were many previous cases of “you can’t lose” in the past, this field is becoming more and more narrow as Australian Capital cities grow, expanding to suburbs that were once outliers and creating greater metro areas.
While your parents certainly want the best for you, just like a business person, they also want the best for themselves as well, which might mean requesting that you live close by, or use their bank. These outcomes might not be the best ones for you, however they are known and trusted sources for your parents who might not have even considered another suburb to reside in or banked with another financial institution in the past 30 years.
Listening to your parent’s advice is not necessarily a bad thing to do, especially if your parents have a solid financial portfolio and have managed their assets well, the trouble comes when parents are the only advice first homebuyers listen to. It’s important to have the choice and flexibility to weigh up information from numerous sources. Children, even as adults often don’t feel that they can, or should, question their parent’s authority.
While complex and slow going, other elements outside your parents advice needs to be considered also, like supply and demand, demographics, current and expected trends, local infrastructure, lending rates.
It is important to check with a financial planner and conduct thorough research that includes additional factors for a solution that will work for you in the current market.
Going to as many professional sources as possible will get you the clarity you are looking for in those complex equations, and also helps uncover the professionals who are looking to make financial gains by offering you skewed advice towards a certain provider.
Your parents are not necessarily going to give you bad advice, but you should check out all your options thoroughly before you make a final decision for your future.
If you would like to have chat about where you are at in your property search, ask questions, or gain clarity around what the next step is for you click here to request a call.
Parley Property Advisory