To Buy Or To Rent: First Home Or Investment Property?
There are considerable benefits to using your first home as an investment property. But it also involves time and effort as well as an element of risk. Some people would prefer to do without the stress and hassle and simply enjoy life living in their first home.
Of course, you can hire professionals like property managers, accountants and solicitors to deal with your investment. It’s ultimately your choice depending on what you want to get out of property ownership. Below are some of the key considerations.
Do You Want Flexibility or Stability?
Many people want to feel an attachment to their first home and make it their own, preferring to live in it themselves. For others, the prospect of being tied to a mortgage and not being able to change location whenever you’d like is unappealing. You need to consider whether you want the stability of living in the same place or the flexibility of short-term leases.
Owning an investment property can mean you maintain the flexibility to move while still enjoying the financial benefits offered by home ownership. On the other hand, you may prefer to not answer to another landlord and have the ability to do what you’d like in and with your home.
Minimising Living Expenses
If you are currently renting cheaply and keeping your household expenses to a minimum, either by living in a share house or a cheaper property, you can continue saving funds with an investment property. Sometimes your investment property may incur higher bills than your current residence if it’s larger. By having your tenant take care of these expenses while paying rent, you can save. Of course, you can also live in the property and rent out the other rooms, but this incurs some tax and requires you to declare the income.
Tax Considerations
Purchasing an investment property as your first home provides tax benefits, such as the ability to claim expenses such as depreciation. These provide substantial savings at the end of financial year. Repairs, maintenance and property upkeep as well as interest on your loan can also be claimed. When you simply live in your first home, all of these are expenses you can’t avoid. On the other hand, your investment property will be subject to capital gains tax which wouldn’t be charged if it was your primary place of residence.
Cash Flow
If you find a property with a high rental yield for a low price, you may be able to achieve neutral or positive cash flow. This means your tenant is paying off your mortgage and other expenses or even providing you with extra funds. This means you can pay off your home quicker.
Buying an investment with a high projected cash flow also makes securing finance easier. Depending on your circumstances, where you are and what kind of property you’re purchasing, cash flow may not be a major issue.
Quality House and Land Package in NSW and the ACT
If you’re interested in buying a house and land package as an investment or as an owner-occupier, explore some of our home designs. If you would like any more information about our services, including our financing options, get in touch with the experts at McDonald Jones Homes.
