Should Your First Home be an Investment Property?

Should Your First Home be an Investment Property?

By Tegan Pratt on May 24 2017

Becoming a Rentvestor may be a good option

Buying a home is a common aspiration in Australia. However getting a foot in the market can be challenging especially at the moment with prices high across a number of our capital cities. Is there financial sense in staying at home with the folks and making your first home a property investment to rent out?

Rentvesting is Becoming a Popular Trend

Saving enough money for a deposit and then buying a home is a commonly held aspiration in Australia.

The urge to splurge on real estate is certainly being helped along by the surge in property prices in our capital cities.

This growth is a double-edged sword however, as while it benefits those who already own property, it's becoming harder for first home buyers to get a foot in the market.

According to the Australian Bureau of Statistics, the total value of property investment in our country per month is in excess of $13 billion.

Besides more opportunity to enjoy your mum's unbeatable cooking, is there financial sense in staying at home with the folks and making your first home a property investment to rent out?



Extra Income

If the rent that your tenants pay is more than your weekly home loan repayments, you will receive an additional income.

You can use this to cover your own living costs or make additional payments to your mortgage to achieve financial freedom faster. 

Deciding on the amount of rent you charge to live in your investment property is a tough one - too high and you won't be able to find tenants, too low and you will miss out on potential profits.

Fortunately, a real estate agent can help you find the right balance.


Tax Deductions

There are a number of tax benefits that have been made available in an effort to make the upkeep of a rental property more affordable for investors.

According to the Australian Taxation Office, some of the expenses you can lay a claim on include:

  • Agent fees and commission
  • Water and council rates
  • Advertising for tenants
  • Home insurance
  • Taxes on land
  • Any maintenance or repairs
  • Pest control, cleaning and gardening

There are many other potential tax deductions obtainable for property investors, none of which are available to owner occupier households.



What Should You Look For When Buying an Investment Property

The Australian Securities and Investments Commission asserts that while homes in regional and rural areas may not have the best capital gains, they can often provide good rental yields.

Within the capital cities, instead of searching for a home you want to live in, you should aim to purchase a property that suits the type of tenant in that area. Proximity to transport, amenities, schools and the current rental demand are all good places to start with your research.


It's Not All Roses

There are a few downsides to purchasing an investment property as opposed to buying your first home to live in.

The First Home Owner Grant can be instrumental in getting you up on the property ladder, but it is only accessible to owner occupier households.

Furthermore, unless you've lived in your investment property for a sustained period of longer than 12 months, you will have to pay a capital gains tax when selling.

If you're undecided, talk to your financial advisor as they will be able to simplify the choice for you.