How to make your Investment property as a starter home
What should you buy first: investment property or home?
With house prices at sky-high levels, it is the million-dollar (or more) question. Should you keep saving to try and buy a home, or would you be better off buying an investment property in the meantime?
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"It's a very individual decision. A lot of it would come down to where you want to live, what your capacity is," says Matthew Clark, principal at RAMS Home Loans Illawarra.
"For a first-home owner buying in Sydney [for example], it's not easy. If that's where you want to live you possibly should look at other options, which could be investing elsewhere."
Here are some advantages of either option.
Buying your own home
If you can afford to buy in an area you want to live – or are willing to compromise – there are definite advantages to buying your own place.
Apart from enjoyment and stability factors, you might also be eligible for a first-home-buyer's grant or stamp duty concessions.
You can also rent out a spare room to help with repayments.
Living in your own place helps you avoid some of the risks of investment properties, which can include buying in an area you're unfamiliar with, getting lousy tenants or having long vacancies.
You'll also dodge landlords' insurance, agent fees, and capital gains tax.
Investment property
Bought for the right price, an investment property can be a cheaper way to enter the market – especially if you live cheaply elsewhere.
Many things are tax deductible, including agent fees, insurance, body corporate fees, rates, interest and repairs. You can also claim depreciation.
Hopefully your investment will increase in value while you're renting somewhere more up your alley.
Clark says low interest rates mean that more investment properties are paying themselves off.
An investment property can also make a lot of sense for young people who might move around for work, or want to travel.
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