Property investment tip 1: Should you buy a home or an investment property?

Should the first property you buy be a home or should it be an investment property is a common question first-time home buyers often get stuck on. It really depends on your situation. If you want to start a family or have absolutely no interest in owning more than one property, then you might want to consider buying a home first because it can give you an immediate sense of security.

However, personally, I think that your first property should be an investment buy-to-let property which you can renovate. The renovation required should be on a more cosmetic, smaller-scale, less-scary level if you don’t have family or friends with the skills to help you out. I like to keep my renovation costs at around $5,000 – $10,000.

The renovation costs can be used as tax deductions in your next tax return. (I’ll discuss tax deductions further in a future blog post). Also, you can make money by renting it out to either long-term tenants, or what I prefer is to rent my property to a business executive whose rent is paid by the company he or she works for. I feel that when you are younger without any major commitments, making money from your properties should be a higher priority over immediate security because you have more time to take risks. And also, the income and equity generated from your investment property can help you retire sooner.

“But where would I live if I rent out the property.” you ask?

You should rent a cheaper apartment or house-share for about 1 to 3 years until your investment property starts making more of a profit. I lived in a house-share with 10 people and then moved into a tiny flat with no window for the first three years, whilst my all my friends lived in more ‘mansion-like’ 2 bedroom apartments.

Unfortunately, you won’t be living like a King or Queen in this period, but I think sacrifices to your living standards are easier to make when you are younger and don’t have scary life-long responsibilities (like babies). Also, on the assumption that you live until you are 80 years old (yes, life expectancy is increasing), three years of living like a pauper is less than 4% of your life. Think positive!

Alternatively, option B would be to live with mum and dad for free. Not the best, most exciting option I must admit but the free accommodation and free home-cooked meals can really help out. You can repay your parents back by looking after them when they are older or buy them a house right next door to yours (Joking!).

Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.

So are you planning to buy or have you bought a home or an investment property? What influenced your choice?

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