21 August 2016 Should your first home be an investment property? These days, young buyers are often giving consideration to buying an investment property first, rather than a home to live in. This is not for everyone and so it is important to weigh up the pros and cons, to determine whether it works for you. It pretty much comes down to whether you are buying primarily for financial reasons or for personal lifestyle reasons. Investing is about leaving emotion at the front door at the open for inspection, and potentially buying a property or buying in an area that you would not personally prefer. It’s about securing future capital and rental growth. Investing tests whether you can buy with your head instead of your heart and even getting your head around becoming a landlord. The genesis of this popular stepping stone route rests in the accelerating prices that have made it more difficult for first timers to secure what they want and where they want to live, especially in major Australian cities. That combined with the much higher numbers in the ‘stay-at-home generation’; potential buyers who have cottoned onto the opportunity of the benefits of rental income while paying the folks little or no rent. Traditionally, past generations saved for the deposit, then took the first small step on the property ladder by buying a modest house in which to reside, often making major compromises along the way, given affordability was an issue. But a benefit of the current investment-first strategy is that after the potential price gains and tax benefits, you could be in a better position to buy yourself an even better first home that you plan to live in. After all, you will have enjoyed an increased ability to service the loan as the property will have been generating its own rental income, and many of the costs including loan interest, are often able to be claimed as tax deductions. As you will likely need to hold onto this property for a considerable period of time, given the cost of buying, it is important to envisage just how it might affect your future life plans. Also beware that states and territories have strict rules about entitlement for first time buyer grants and stamp duty concessions, so you will need to investigate their rules, as buying an investment property first will probably disqualify you from receiving a first home owner grant in the future. You should always obtain your own independent financial advice on what investment strategy is best for your personal circumstances. Speak to Matthew Clark at RAMS Illawarra about your home loan needs.