First Home Owner/Investor

Director of wHeregroup, Todd Hunter, has been professionally investing in property for seven years and until January 2009 did not own a "home" but rented instead. There are some considerable advantages to this method:

•    The rent was far less than what the mortgage would have been in his chosen area.  Rent can be much the same as interest, one goes to the vendor as rent and the other goes to the bank as interest, either way this is dead money, especially if the area your home is located is not likely to increase in value...would you buy or hold shares if they didn't increase in value???

•    You can live where you want to live that you may not have otherwise been able to afford

•    There can be tax advantages for those who must also do work from home as part of their employment, therefore allowing you to claim part of your rent and utilities as a tax deduction. Please discuss this with your accountant before proceeding to claim any of these deductions

•    The area in which you choose may be decreasing in value and allowing you to buy in areas where your money will appreciate. This can also allow you to invest your money elsewhere, then sell when market is becoming ripe and buy in your chosen home location when the market is low, therefore maximizing your capital return

•    Buy multiple investment properties in growth areas then later sell and buy your home in your chosen area with a small morgtgage or no home mortgage at all

But for every positive to an idea there are also some negatives:

•    You may have to move if the owner decides to sell or move back

•    Increase in rents

•    Difficult to find a rental property in a tight rental market

Please note: that under current legislation, if you were to invest in property and later buy a home, you are still entitled to receive the First Home Owners Grant but not the stamp duty exemption.

But if you were to invest wisely, the capital growth would far out way the savings in stamp duty

So let’s do a practical on the comparison.

Parameters are a couple on $55,000 each with a $50,000 deposit, wealth creation time 10 years

Option 1 Buy a home or unit for $450,000

Repayments per month interest only @ 5.07% $1901 per month.

Option 2 Rent for $400 per week and buy an investment property for $300,000

Repayments per month interest only @ 5.07% - $1267, expected rent $1386 = $119 per month in front. Outgoing payments per month are now $784.00, you are able to live in the home you want, have an investment and as the market moves, your capital will grow thus enabling you to one day buy the house you want, rather than the one you need?

Now the above calculations do not take into account interest rate increases or decreases, nor include agency fees for rental properties. This is simply an example of the available opportunities, we recommend that before proceeding any further with any such plan, you consult with the wHeregroup, and your accountant.

Like to know more?

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