"Do I buy my first home or purchase an investment property?" It's a common question first home buyers ask themselves. You may be surprised to learn that, according to anecdotal observations from RP Data CoreLogic in 2014, increasing numbers of first time buyers are investing before they buy a place of their own.
While it may seem counterintuitive to become an Australian property investor before you've even bought your first home, there are a number of advantages that explain why it's a popular choice.
Many first time buyers are investing before owning.
Maintain your current lifestyle
Buying an investment property can work for those who are renting in an upmarket suburb they wouldn't be able to purchase a home in. If you buy an investment property in a more affordable area first, you can continue living where you are while receiving a passive income.
Rent generally ends up cheaper than mortgage repayments, so this may work for your benefit. Talk about having your cake and eating it too!
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It's no secret that house prices in Australia are high, pricing many would-be-first home buyers out of the market. It can feel like by the time you'll have saved up enough for a deposit, you'll be ready to settle down and start a family - a large expense in itself.
A well-placed investment property can be your ticket to that dream home, however. You can use your rental income to meet your mortgage repayments while still keeping up with rent.
In the meantime, any savings you make from making mortgage repayments on a more affordable property can be pocketed by you. But instead of using this extra cash in hand to fund a more extravagant lifestyle, let it build up until you have enough for a deposit for the house you want to live in.
Don't forget, too, that over time, the equity in the property will grow. In time you can leverage that equity to buy a house of your own.
