As many of us know, buying where you can afford does not always equate to buying in an area you love. Even the worst house on the best street can be way out of budget these days. So how can you enter the property market to become a home owner AND live where you really want to live? It’s simple really: rent where you love while buying to invest where you can afford.
Though often overlooked as an option, there is no rule that says you need to own your principal place of residence in order to invest in property. In fact, it’s a really effective double play with many potential benefits.
Of course, you’ll need to make some smart decisions for this to work for you. But when done well, buying an investment property while renting in your dream location can give you all the benefits of property ownership without sacrificing your lifestyle.
There are other perks too. Let’s consider them:
Effective wealth creation — sooner
By the time you saved enough or waited until circumstances allowed you to afford to purchase in the area you truly want to live in, chances are you will have missed out on a lot of capital growth. Not to mention strong rental returns from your property (again, it’s all about choosing wisely — this is where we really shine for you).
Purchasing to invest rather than live could even enable you to generate cash flow. Down the track, or right away in some cases, rent from your investment could be paying off the property, and contributing to or even covering your rent! Compare this to owning your own home — you won’t generate any cash flow from it and in fact won’t really know if you have any profit from it until it comes time to sell.
Tax advantages on investment properties
As an owner of rental properties, there are many tax benefits for you to lessen the cost of property ownership. Many of your property expenses such as improvements, maintenance and repairs, can be offset against your rental income. Depreciation of your property can be a tax deduction. Even the interest on your property loan can be claimed as a tax deduction, if your property is negatively geared.
When done properly, the cost of paying down the loan on a rental property should be achieved by the Tax Man, the Tenant and to lesser extent, You, the investor. The debt on a rental property is good debt, as opposed to owning your principal place of residence, which is bad debt.
We can help you get the most out of your investment property (and the tax man), just chat to our team.
Continue to rent in the location you love, while in the meantime your investment property increases in value or you buy more properties to create an impressive portfolio. Buying to invest means you could go on to purchase additional investment properties without the need to sell up and pay capital gains tax.
By living in a rental, you can change where you live without the need to pay expensive fees like stamp duty.
And if you do still want to purchase a principal place of residence, you’ll have equity behind you to perhaps even end up buying in that dream location after all!
Share the investment
Depending on your financial situation it may be worth considering buying an investment property with a trusted family member or friend. You would be unlikely to do this when purchasing a home to live in, but sharing income drawn from an investment property can work.
Explore your options and make the right property choice to suit your circumstances and goals
Your property goals are our property goals at Providence Property Group. With a focus on research and a commitment to results that exceed your expectations, you can trust our team of property investment specialists to guide you in the right direction based on your goals and budget. In fact, we can do more than just guide you — our services and expertise extend to helping you right through the property research and purchase journey, and beyond.
Is buying to invest right for you? Start a conversation with us today by calling 1300 25 25 50 or email firstname.lastname@example.org. Alternatively, just pop your details into this contact form and we’ll get back to you.