All around the country, as nervous home buyers peruse listings and sit in mortgage broker offices, there's likely one dilemma that's weighing heavily on their mind: Should I take this moment to achieve the dream of home ownership once and for all? Or should I become an Australian property investor?
It's not unfeasible. According to RP Data Senior Research Analyst Cameron Kusher, though the Australian Bureau of Statistics' method for counting home purchases leaves out first time buyer investors, there is anecdotal evidence that first home buyers are foregoing owner occupation for potential capital gains.
Is this the right idea? Should you join this apparently growing throng of first time investors?
The case for buying your first home
Perhaps the main reason to buy a home instead of an investment property first is the security it can bring you. This is not only in the sense of having an investment that you can physically touch, interact with and know that you own, but also financially. After all, simply owning a home and steadily repaying the mortgage is an investment in itself, creating equity which you can use down the line for another purpose.
Along with this, if you buy an investment property first, then you won't qualify for stamp duty exemptions;or a first home owner grant when you want to purchase a home later. One of the stipulations of this grant is that you cannot have owned property in Australia beforehand, and you also must occupy the property to qualify, excluding the grant from applying to investment properties.
The case of buying an investment property first
Of course, there is a compelling financial case for first time property investment too. Remember that, because this isn't your dream home, you can invest in a house without emotion. Rather than your must-have features, when choosing an investment home look for solid residex predicted growth, good rental return and an area with solid population growth, infrastructure, transport and jobs.
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Recent research from The Reserve Bank of Australia suggests that, going by long-term trends, Australians will find it less expensive to rent than own a home. This of course depends on the residential area - in some suburbs it's cheaper to buy. If you live in an expensive area, however, investing can be a good way to enter the property market, and you may choose to sell this property off down the line anyway.
Along with this, if you own a cash flow positive property, this can contribute mightily to a better financial situation. Not only can it help you pay off a large debt like a student loan, but it can also assist you in meeting regular costs such as your rent, utilities and groceries.
Best of all, any money that you save - and the profit you make from eventually selling the property - can then be used to finance home ownership at a later date. In this way, as property prices climb ever higher, an investment property can actually serve as the stepping stone to owning a home.