Just like the egg and the chicken, it’s often a bone of contention between estate agents – which do you buy first, the home or the investment property? It’s always been the Australian dream to have security and peace in your own home, on your own piece of exclusive land.
Instead of saving up and getting a mortgage for an owner-occupied home, many Australians are looking to make an investment in property for the first time. This can yield massive financial advantages, but can also lead to complications in some cases. Here is a quick overview on the positives and negatives of investing.
The main argument in support of purchasing an investment property, is that it can be much harder to own in the area specified by the client. It’s been found that in many of the cheaper suburbs, it is actually just as cheap to rent as it is to service a mortgage.
Clearly if you make a move to buy rather than rent, at the end of the mortgage you’ll own the property. In this case we’d recommend that you owner-occupy the house, until the mortgage is cleared.
On the other hand, inner-city and trendy locations are still out of financial reach for most people, even with interest rates at a historic low. This is due to the outrageously priced homes in most areas of the country.
Consider how houses in Parramatta were once affordable to people with a mid-range budget, yet now they are being sold at a minimum of $1 million. It is no wonder homeowners are looking for a different way to get on the investment property ladder.
It might be worth considering buying an investment property in a less expensive area of the city. This can provide a much more stable source of income from rent, as well as the potential for tax breaks on your earnings. This can prevent you from coming to resent a property for not being the reliable source of income you hoped it would be.
The ups and the downs
Investing in a property before a home is considered a highly unconventional move in real estate. There are some things you’ll want to be aware of before you make that move, as they can be deal-breakers.
In some states of Australia, there is a requirement on people planning to live in a newly-purchased home. They must be prepared to live in it for 12 months consecutively, within a year of agreeing the deal, or the construction completion. This will qualify the grant for the owner. This rule applies in some but not all states, with Victoria being a prime example.
Owner-occupancy however, can drastically alter the way your loan shapes up. Make sure that you speak to your lender in order to find out the finer details, but generally speaking investors need only pay interest on the loan; whilst an owner-occupier will be paying off the loan and the interest.06