New research shows that while the majority of investors have a good grasp on basic property buying skills, there are some areas about purchasing a property that investors are unsure of, which could result in costly mistakes.
The research, conducted by home loan lender ME, quizzed 1,000 buys who are going to, or who have, purchased at least one property, which included first home buyers, owner occupiers and investors.
Investors came in first place; 61 per cent of first home buyers failed the quiz, compared to 27 per cent of owner occupiers and 25 per cent of investors.
Despite this good overall standing, there were some areas that investors definitely need to brush up on, otherwise they could find themselves missing out on cash flow, or even buying property.
“Financial literacy is a valuable asset and one of the biggest money savers over time, especially when it comes to buying what is likely to be the biggest investment of your life,” said Patrick Nolan, ME’s head of home loans.
“Some Aussies fail to educate themselves because they find finances dull and complex and think they know best, while others find working with numbers difficult and put their head in the sand.
“But like it or not, financial decisions including buying a property is best made on facts — a hunch or a guess could lose you thousands.”
For example, when buying a property at auction, 46 per cent of investors said they are required to pay the deposit when they win an auction on the day. While this answer was the one with the most answers, 53 per cent were either incorrect or not sure as to when the deposit should be paid.
Investors were also the group with the most correct answers about whether or not there is a cooling off period when you buy a property at auction, with 36 per cent saying there is not, compared to 34 per cent of owner occupiers and 15 per cent of first home buyers. However, everyone was mostly incorrect or unsure, which included 64 per cent of investors.
Mortgage insurance was another topic that investors were unsure of, and in fact the majority were wrong about: only 20 per cent of investors answered correctly, saying that it does not cover the lendee at all. The majority, at 43 per cent, said that it would cover them somewhat.