From First Home Buyer to First Time Investor: What You Need to Know

Changes in the First Home Owner Grant (FHOG) and rising prices have made it more difficult for many first home buyers to find financing. The grant is only $3,000 toward an established home, while the $10,000 grant for a new home can be a complicated process. Banks have become a lot more scrutinising of loan applications, so it can be tough to get your first home loan without a good chunk of genuine savings.

Ironically, it has become easier for investors to find financing. This has produced a situation where many first home buyers are better off buying an investment property as their first home. Part of this is because investors have helped fuel a rise in property prices. So, how did this all come about?

The Pros of Property Investment

Banks are friendly to investment properties because the rental income generated by the property makes the borrower better able to make loan repayments. The loan can also be setup as interest only, which most banks only allow for investment purposes.

Also, a lot of the expenses generated by a rental property are tax deductible, including the interest on your loan. This benefit improves cash flow and isn’t available to those who occupy the home they own.

You Dont Have to Live There!

Purchasing an investment property as opposed to your own home provides a greater sense of freedom. Most of us have a particular location or neighbourhood in mind where we would like to live. When buying an investment property, that isn’t nearly as important as how much rent return and capital growth the property will generate. This allows us to buy investment properties in locations we wouldn’t have considered for a residence, effectively creating a lot larger market and a lot more choices.

Live in Now, Rent out Later

If you can manage to stomach living in the property for 6 months, a popular choice with many first home buyers is to get the FHOG, moving in sometime within their first year of ownership, living there for 6 months and and then going ahead with renting the property out after that.

If you buy a new property, qualifying for the $10,000 FHOG and purchase a property that is under $500,000 (the stamp duty exemption threshold), then you can come out ahead!

Do Your Due Diligence

We recommend crunching the numbers; figure out which course of action will provide more benefits to you: the FHOG or an investment property. Take the FHOG into consideration, but also remember the tax savings and the rental income you will receive if you purchase an investment property.

Investors Edge Can Help

At Investors Edge, we specialise in investment property in the Perth market. We outwork our competitors when it comes to doing research. We have helped turn a lot of people just like you into prosperous, successful property investors. Call 1300 472 427 today.