With home prices skyrocketing in recent years, more and more Australian first homebuyers are purchasing an investment property before a home.
Many consider purchasing an investment property before a home a more affordable way to get their foot on the property ladder, but should it be the aim for every first homebuyer?
Why should you invest?
For some the benefits to renting or staying at home better suit their current lifestyle rather than paying off a mortgage.
- It may be cheaper to rent where you actually want to live. This is true for both area and quality of the home.
- The range of tax deductions associated with owning an investment property (such as repairs, mortgage interest and rates) could significantly benefit your financial position.
- Depending on your state, you may still be eligible for the First Home Owner Grant after you purchase an investment property. Or if you wanted to use the grant for the dwelling, you could live in it for the required time before converting it to a rental.
- If you haven’t settled down yet and still want to travel or move around then you are not held back by a mortgage.
- It can also provide an extra revenue source.
Why wouldn’t you invest?
Get an investment wrong and it’s not a cheap mistake. Keep the following in mind when making your decision:
- Selecting a property that will build your wealth is not as simple as “this place looks nice”. Plenty of research is required to find somewhere that will be successful.
- Another major risk is your ability to afford the repayments on top of your rent if the property becomes vacant.
- Do you fancy becoming a landlord? Your property and tenants will require constant checks plus any damage and repairs could be at a cost to you. You can always hire an agent but that is just another expense cutting into your returns.
- Don’t forget that if it isn’t your main place of residence then any sale is subject to capital gains tax.
Why should you buy a home?
The main reason is that it’s yours; plus owning a home gives a sense of pride you can’t put a value on. Other reasons include:
- You no longer have to worry about rent inspections or landlords - you can do what you want.
- You are paying off your mortgage, not someone else’s.
- You may find a place that is perfect and you are ready to settle down.
So which option is best?
Unfortunately, there is no golden answer. The right path to take depends on your situation and property goals. What we can recommend is that you contact a Resolve Home Loan Specialist, whichever option you choose, so that you have the best financial solution for your decision.
Don Crellin is the Managing Director of Resolve Finance, an award-winning mortgage brokerage and leader in the home finance field. Resolve Finance is part of the Alcock Brown-Neaves (ABN) Group and, on average, help over 200 homebuyers into their home each month; financing over 23,000 homes since establishment in 1997.
Don brings a wealth of knowledge and experience to the company having over 25 years in the mortgage industry, spanning across Australia and New Zealand.