Why 1st Homebuyers are Choosing Investment Houses Over Forever Homes

Although attaining the great Australian dream of owning your own property is still alive and well today, things have definitely changed for first homebuyers in the decades past. It used to be that the sole purpose of getting into the property market was to find that one and only forever home that would see you through the good times and the bad. Today however, it’s becoming more and more common for first homebuyers to choose an investment property as their beginner home. 

In a recent survey conducted by Mortgage Choice, it was found that a sizable 36% of investors were actually first homebuyers. It’s not surprising when you look at the trends; the majority of Australians want to live in or around the city, yet this is becoming less and less affordable with the cost of house prices skyrocketing every other month. 

So for those on the verge of entering the property market, buying a home in a desired location may not be an option for many, and this is where the investment property comes in. A greater number of millennials are opting to buy homes that they never intend to live in, but can afford nonetheless. This gives them the freedom to live closer to the city or to move when they feel like a change, all while sitting on a solid home investment. 

This is what we like to call Rent-vesting, and it could be exactly the thing you’re looking for. 

Even if you don’t fancy yourself an investment tycoon, the end goal could ultimately result in you securing that dream you’ve always wanted. How? Well, let’s take a look. 

Bring in some help

So you’ve found the one. You’ve stumbled upon the perfect home and now you can’t think of anything else. It’s just within reach, but then you find out the price… A lot. All is not lost though! Perhaps this property is above your budget for the time being but where there’s a will, there’s a way. 

Why not consider sharing the load and renting out the spare room. Bring in a tenant or two and let them pay your mortgage for you, at least for a little while! This will give you all the time you need to get your finances in order, and then when the time is right – voila! You have your dream home all to yourself. 

This might not be the most conventional option for first homebuyers but it’s certainly an effective one. By finding yourself tenants and supplementing with your own savings and disposable income, you’ll likely end up having the mortgage paid off in no time. It’s definitely a compelling method of accelerating the repayment process, that’s for sure. 

Why capital growth is key

The basic definition of capital growth is the increase of the value of an asset over time. All good things take time as they say, and this couldn’t be more true of investing in property. This is why it’s absolutely essential that when it comes to buying up property, you do so in an area that is most likely to offer high capital growth. 

This doesn’t have to be somewhere you actually want to live either. You don’t need to have any kind of emotional attachment to this house whatsoever since it’s merely a strategic investment that will ultimately be a means to an end. What’s more, by putting your money into an investment property, it gives you the flexibility to go and live wherever the heck you want! 

So if this sounds like a potential option for you, focus on researching areas that have shown significant growth, and have the potential to continue. Up-and-coming suburbs are always a good bet as well – areas that have become hip and trendy in recent years that show potential for economic growth. Once you’ve found the perfect area, find yourself the perfect investment home – and don’t forget to have a pre-purchase building and pest inspection before you go all in! – if everything checks out, buy that sucker up and then lease it out as soon as you can. 

If all goes well, when it comes time for you to buy your real forever home, the investment process will likely lower the full amount of what you need to borrow for your dream home. 

So is Rent-vesting for you?

Before you give me a resounding and unequivocal “yes please!”, it’s necessary to note that as fantastic an option as it can be, going down this path is not without its risks. Although investing in property is generally considered to be one of the most stable and predictable methods of investment, it doesn’t mean that things can’t go wrong. Property prices do fall so there is always going to be that possibility you need to consider. 

Another factor that is worth taking into account is that being a landlord isn’t for everyone. Having an investment property isn’t as simple as just watching the money roll in. There’s always going to be a healthy level of management involved and it’s not something you can neglect whenever you feel like you’ve had enough. So when all is said and done, you just need to ensure that this is going to be the right fit for you, your lifestyle, and the end goals. 

I would highly recommend you start off by putting together a water-tight budget and talking to an accountant and financial planner. This will at least give you some outside perspective and help determine whether this is the right path for you. But if you’ve made up your mind and your ready to roll, all power to you! Go get ‘em you budding rent-vester, you. 

By |2019-09-13T10:27:24+00:00August 14th, 2019|Uncategorized|0 Comments

About the Author:

Mike Heathcote
Mike Heathcote is the founder of Building Masters Inspections and a veteran builder with decades of experience. Utilising his decades of industry knowledge, Mike has set up a Building Inspection service that is catered towards providing expert opinion on the true condition of buildings and helping house buyers find their perfect home Melbourne wide.

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