Investment properties are one of the best ways Australians can build wealth. Historically, home values in almost all areas have risen substantially above inflation. According to the Reserve Bank of Australia, home prices went up an average of 7.25% per year. It’s worth noting that those increases don’t account for potential rental income returns as well. It’s hard to beat that type of performance with any other investment! With that said, first home buyers typically purchase their primary residence and then move on to investment properties.
What if first home buyers flipped that order though? What if, instead of saving for a first home, you bought an investment property first? Sounds a little unconventional, of course, but there are three good reasons why it might make sense for you!
First Home Buyers: Save for the Home You Want
You might be reasonably comfortable where you’re living right now. Maybe you’re renting an apartment in a beautiful area, and you want to buy a home there. If you’re in Melbourne’s inner east side, that means you’ll need a cool $1.34 million.
20% down will cost you $268,000. Even then, you’ll have a substantial balance!
Saving $268,000 for a home is a big ask. However, you can get condos that cost $250,000 – if you’re looking in the right areas. What if you put 20% down on that ($50,000) and rented it out? You’ll be using the rent to build equity. The value of your condo will go up, and you can save on the side as well. Once you get to the point where you can put enough down on the home of your dreams, you can sell the condo and use the equity to buy your perfect place.
Extra Income in Early Career Is Beneficial
When you’re starting in the working world, you’re heavily dependent upon one income stream – your job. If you lose your job, you quickly lose your ability to pay bills.
If you had a second income stream, though, you’d be more resilient. An investment property can provide you with that extra source of revenue. Even if you lose your job, you can count on the rental checks to help you get by!
Rather than going all-in on your job and your primary home, it can sometimes be beneficial to have a job, a rental income stream, and then get your home. That way, if you lose your job, you’ll have more of a cushion to make your mortgage payments.
Develop Business Acumen
Running an investment property requires you to learn about income and expenses. You’ll need to keep track of expenses that are deductible and learn about concepts like depreciation. Even if you have someone else do your taxes for you, these are still concept you’ll need to know.
When you’re thinking about being a first home buyer, you’re often at a stage in your life where learning how business (and how to run a business) will serve you well. By diving into the world of investment properties, you’re fostering that entrepreneurial spirit!
First Home Buyers: Build Wealth Through Investment
Everyone’s financial situation is different, but in some cases, it can make sense to buy an investment property before your primary residence. If you’re interested in getting an investment home or condo, please get in touch with us at Buy Australian Property!