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SHOULD YOUR FIRST HOME BE AN INVESTMENT PROPERTY?



Are you a first home buyer tossing up between purchasing your primary place of residence or an investment property first?


Which strategy is the best for long term success?


Well, it really depends on a few factors as each person is different with varied financial and personal circumstances.


Start by asking yourself:

  • Where do you want to live?

  • What is the amount of your deposit?

  • What is your borrowing capacity?

  • What is your preferred lifestyle?

  • Do you have job security?

  • What will you want and need in retirement?

Depending on your age, the great Australian dream of owning your home is no longer a dream for many, in fact, for many, it has become an unachievable nightmare or simply no longer a dream.


Cracking Into The Property Market

Getting into the property market, particularly in Sydney and Melbourne has become difficult in recent years.


Saving that initial deposit has become increasingly difficult as we are in a time when borrowing money has become a lot more difficult for a few reasons, including:

  • Lack of discipline and sacrifice needed to save a deposit

  • Living beyond one’s means

  • Slow wage growth

  • The current economic climate doesn’t help matters either.


Generally speaking, everyone wants to be close to work and close to the "action", however the affordability to purchase close to major CBDs in Australia has become exceedingly difficult for many.


This desire for convenience may aid in determining whether it's right to purchase a primary place of residence or an investment property first.

Which Strategy Is Right For You?

What suits an individual differs for each person. What suits one, may not suit another.


Like everything, both strategies have their pro’s and con’s, so it's very important to work with trusted professionals in this process so you can figure out what strategy is right for you. They will take into consideration your: budget, preferred lifestyle, and how and when you want to retire.

The bottom line in terms of which one is easier to hold and which makes more money, also depends on a lot of factors such as interest rates, income bracket, yield, vacancy and particular suburb desirability.


Interestingly a study conducted by RBA on housing between 1955 and 2014 revealed there was very little difference between the two strategies in terms of costs and return-on-investment (ROI).

Key Takeaways

Either way, to get into the property market successfully you must purchase a property that ticks all of the macro and micro fundamentals.


Remember, all financial and lifestyle circumstances should come into the mix when selecting the type of strategy you wish to adopt.


If you have further questions on which strategy is right for you reach out to our team here.


To stay up-to-date make sure you join our Weekly Property Market Pulse Newsletter here.


Warren Jacobs - Senior Property Investment Consultant at Meridian Australia


P: (02) 9939 3249


E: warren@meridianaustralia.com.au



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References:

[1] RBA - 'Is Housing Overvalued?' Ryan Fox and Peter Tulip.


Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.


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