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Buying an investment property before buying your first home

by xyonent
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The dream of owning your own “castle” has changed a bit, with many first-time home buyers today purchasing an investment property as their first purchase.

Australians have a growing desire to live close to work and where things are going, which is why most people prefer to live near the centre of a capital city. However, with prices rising in most capital cities, it is becoming increasingly difficult for buyers, especially first-time home buyers, to purchase property in or near a city centre.

The growing appeal for younger generations to rent in desirable locations (which they cannot afford) or buy an investment property they can afford but do not want to live in is behind the change in thinking behind buying an investment property before buying their first home.

The benefits of buying your first property for investment purposes

This trend, known as “rent vesting,” suits many millennials’ lifestyles, allowing them flexibility in where they live, the opportunity to travel, and grow their assets at the same time.

Interestingly, this change could mean that official statistics showing first-home buyer activity at an all-time low may be understating the actual buying activity of young Australians, as renters buying an investment property are not recorded as first-time home buyers in the data.

Buying an investment property first can help you achieve your ultimate goal of owning your dream home in a number of ways.

1. Someone pays the mortgage

Imagine you find a property you would love to live in, but you can’t afford to buy it right now.

One solution is to rent it out initially and help the tenant repay the mortgage, until their financial situation improves and they can move in themselves.

Tax benefits such as depreciation and negative gearing can help with managing the difficult loan in the first few years.

With rental income and regular savings, you can pay off your mortgage much quicker than if you moved in straight away.

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