The great Australian dream has always been having the security and peace of your own home, on your own block of land. But how to go about achieving it? Rather than simply save up for a deposit and take a mortgage on an owner-occupied home, many families and individuals are now making their first property an investment.
This offers a number of advantages, but also complicates matters in a few key areas. Read on to get a quick overview of the pros and cons of both.
Location, location, location
One of the biggest arguments we hear for purchasing an investment property is that it’s much more expensive to own in the client’s chosen area. In many cheaper suburbs, the difference between the cost of renting compared to the cost of servicing a mortgage is non-existent or so small it might as well be. It’s here that we still recommend clients consider owner-occupancy.
Conversely, many inner-city and high demand localities are still unaffordable to many even with historically low interest rates. This is simply because of the stratospheric price of homes in many parts of the country. When formerly affordable areas such as Parramatta now have a median house price above $1 million, homeowners will begin to look for alternative routes into the market.
Buying in a less expensive part of the city gives you a stable income from the rent payments, as well as access to a range of tax breaks. This can help you lay the foundation for a home you’ll really love, not just tolerate.
What you gain and what you lose
Be aware of what you’ll trade when you make the historically unconventional move to invest in property first. Some states, including Victoria, require that people intend to live in the newly-purchased home for at least 12 continuous months starting within a year of settlement or construction completion to qualify for the first home owners’ grant.
Additionally, owner-occupancy or investment will affect your loan structure. Speak to your broker or your bank to find out the specifics, but broadly investors will only have to pay off the interest of the loan, while owner-occupiers will have to pay off both the interest and the principal.
Still not sure? Speak to OBrien Real Estate today and utilise our years of experience in the market. We’ll help you make the right decision for your finances and circumstances and help you achieve your property goals.