4 reasons to consider an investment as your first homeOctober 5 2016
Many first home buyers are bucking tradition and making their first home purchase an investment property; getting the most out of owning property and still maintaining the lifestyle they desire. So why is this so?
The origin of the trend of first home buyers turning to investment properties lies in Perth’s increasing property prices in the most desirable central locations.
Traditionally, past generations of first home buyers would have saved a small deposit, and taken the first step to purchasing a modest home to live in, usually having to make compromises on location and inclusions in order to fit within their budget.
With a strategy of making your first home purchase an investment, first home buyers are now able to get onto the property ladder without having to compromise their lifestyle or living conditions. This puts them in the perfect position to buy themselves a better ‘live in’ first home in the future.
This strategy is commonly known as ‘rentvesting‘ and centers around purchasing a first home as an investment, generating rental income to assist in servicing the loan and using this property as equity for a future investment or primary residence purchase.
So, what are the top 4 reasons you should consider an investment as your first home?
1. Assistance in paying off your mortgage
When you purchase a first home as a primary residence your mortgage sits entirely as a debt. By making this an investment property instead you are earning the regular income from the rent, which will help you better manage your cash flow. If you purchase carefully so that your rental income and repayments are on par, your tenants will essentially be paying your mortgage repayments, or most of it.
2. You may pay lower repayments on your loan
Your mortgage terms and conditions will vary depending on the provider and offer you have chosen, however property investor loans usually allow you to pay just the interest on your mortgage for a number of years. The lower repayments can make it easier to cover your mortgage with the rent earned and give you the budget to rent where you want to live. In contrast, if this was an owner occupied property you may be obliged to pay principal and interest repayments.
3. You can enjoy a more preferable lifestyle
By choosing an investment property as your first home you will be getting the benefits of building a property portfolio while still having the freedom to rent in a location that suits your lifestyle needs. This allows you to not compromise on the location or house that you can afford to rent, but would not be affordable to purchase as a first home.
4. You can claim deductible expenses
There are a range of expenses that can be claimed as tax deductions in relation to your rental property. Some of these include interest payments, maintenance costs and rates. In contrast , you would not be entitled to claim any of these if you were to buy the home as an owner-occupier.