The first property you buy doesn't have to be the one you live in. Starting out with an investment property is one way to get a foothold in the property market, and would especially suit the following scenarios.
You can't afford to buy in your favourite suburb
You might want to live near beaches or cafes or close to work so you don't have to waste time commuting. In which case it may be more cost-effective to rent where you want to live and buy an investment property in a more affordable area. There are some investors who have never lived in a property they own, choosing instead to rent in desirable locations they would never be in a position to buy.
You haven't decided what kind of home you'd like to buy
You may not yet have a family or you might be expecting to change job locations, so you are not sure what home would suit your lifestyle. You can still buy into the property market but you can focus on what type of property would attract tenants rather than whether it would suit you.
You don't want to tie up your cash flow
Your tenant pays down your home loan while you only have to pay rent - meanwhile your investment property grows in value. You might even be living with your parents or house-sharing to keep down the cost.
You can claim a range of tax deductible expenses through your investment property, which will help reduce your tax bills and improve your cash flow. When you live in a home, the debt is not tax deductible.
As long as the property you buy experiences capital growth, you can draw upon the equity to buy a home or expand your property portfolio down the track.
DISCUSS YOUR STRATEGY WITH YOUR MORTGAGE BROKER
Renter-investors should have a clear strategy in mind as to what they are going to do with their investment property, as this will impact their lending and finance choices.
Consider issues like how long you want to hold onto the property, how to best manage cash flow and whether you plan to draw on the equity of your investment to fund another purchase. By using a mortgage broker you can have access to a large range of lenders and save thousands by having the correct lending and finance structure in place.
Regardless of your circumstance, it's important to seek our advice and that of a tax accountant to help you get the most out of your investment strategy.