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A year ago, no one would have put his neck on the line and predicted two consecutive rate cuts by the RBA. The Sydney market was showing signs of bursting at the edges, and then came the news of rate slashes. One is inclined to believe that it made matters worse for the Sydney property market. Or did it?

Australians have great affinity for the brick and mortar and while the number of those owning property outright (as against those renting or using a mortgage) has sharply declined over the last couple of decades, we cannot but confess that we love buying homes.

Two crucial questions ahead of a first home buyer

If you have your first property in mind, you cannot be over-prepared. There is just so much diligence needed. A seasoned buyer’s agent on your side can be your pass to success but the work at hand, though delegated to your agent, remains a big one. There are many questions you need to answer before getting your deed signed (and even here, there can be relevant questions needing an answer). Here are two of them, and both are very crucial ones, I believe.

How much should I pay up front?

Before anything else, there is a need to figure out the initial deposit. So how much should you pay up front? A minimum of 5% is a must as an upfront payment. Also, you need to make doubly sure that the money is a part of your savings and not a gift. This reassures the seller that you can budget your money.

In the event of paying a sub-20% deposit, you need to buy Lender’s Mortgage Insurance (LMI). This insures the lending party against buyer default. I think it may be wise not to put 20% as upfront payment for your first home even if you have the resources. You can go for the LMI and think of its premiums as additional mortgage. However, the amount of money you save by not paying a 20% upfront can become a part of an emergency offset account which can be quite a handful.

When should I enter the market?

First home buyers would also like to know if there is a right time for them to enter the property market. Only recently, the FHBs were feeling all but elbowed out of the property market race. They have made quite a comeback by turning into investors.

The idea they are following is novel. They are buying properties in reasonably placed, away-from-the-CBD locations (where purchases are cost-effective) and renting out in fashionable neighbourhoods. This way, they are living their great home ownership dream and enjoying a lavish lifestyle, too.

This is a learning curve for them and the gentrification trends suggest they have been learning the game right. I feel there is no good time for a First Home Buyer to move into the market. Pundits time the market and yet one feels there is no bad time to buy a property.

Either you will make money through capital growth in the same property cycle or if you buy at the peak you can always hold it and sell it in the next property cycle which is likely to have higher peaks. Even if I take an inflation-adjusted conservative figure, you will have to be really unlucky not to register a gain.

You don’t buy houses the way you buy your grocery or fuel for your car. Even the most extravagant investors do not add to their portfolio every day. Making a property investment is a tough decision, even at the best of times. For property investment decisions, Due Diligence is what the doctor ordered. After all, if you have to err, you have to err on the side of diligence. There are at least 4 aspects you need to figure out before making the purchase.

Sydney has done so well in recent times that it has become quite an effort to amass an upfront deposit for your first Sydney property. Sometimes, you may have to pay as much as $250,000 as a lump sum payment before your lender makes a mortgage agreement for you. There is, however, a smart strategy for accumulating this kind of capital.