Rising property values are making it harder for first home buyers to get into the market. With many reports of both Australian and foreign investors pushing up the prices and other factors affecting affordability, buying a first home can seem unattainable for many young couples.
With investors driving up competition in the property market, joining them and buying as a first time investor rather than a first home buyer could be a great way to get on the property ladder.
When you look at buying a property from an investor’s point of view, rather than looking for your first home, the options available to you increase substantially and can offer many advantages.
Expand your options
When you’re looking for a property to invest in rather than one to live in, your options for properties to consider buying expands greatly. You no longer need to be tied to a certain area that is close to work, or that fits with your lifestyle. With a larger number of suburbs to look in, the amount of properties you can consider obviously increases. You can also look at ’property hotspots’ where the growth on your investment could potentially be higher than in the area you want to live in yourself.
It also means being able to consider cheaper options. Looking in another city with more affordable property prices can also make buying for the first time much more realistic. When you’re not looking for your dream home, finding a property that makes sense numbers wise becomes a lot easier. If you want to live in an expensive suburb, it can be much more affordable to rent in the more expensive suburb and have an investment property in a cheaper area.
Extra tax deductions
There are a lot of tax deductions available for costs associated with a property when you are an investor that aren’t available as an owner/occupier. Some of these include interest on a loan used to purchase the property, body corporate fees, council rates, insurance and other costs associated with repairing and maintaining the property.
Increased borrowing power
You may be able to borrow more for an investment property than for a home as having a tenant paying rent adds extra income to be put towards loan repayments. This will be considered by your lender when they look at your capacity to make repayments on a loan.
What about the First Home Owners Grant?
While the rules for the First Home Owners Grant vary from state to state, in most situations there is a condition that you must live in the property for at least 6 months after settlement. If you’re buying to invest, you obviously won’t meet this condition, however the rental income and tax benefits you receive as an investor can potentially outweigh the benefits of the First Home Owners Grant.
If you’re considering getting into the property market as a first time buyer, talk to a professional to look at the numbers from both the investing and owning perspective, and consider what is possible with your current financial situation as well as your long term goals.
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