We have been given the chance to live rent free for 12 months. ultimately we had plans to get a house deposit together. Our original budget was going to see us bank $80k by the end of the 12 months, however 2 months in and my partners work has dwindled seeing a 20k cut in his pay. Our bank balance is no where near what it should be for 2 months in.
House prices continue to rise in our area, to the point if we leave it much longer then the original 12 months planned it will see us pushed out of the area we have both lived our whole lives.
So we have thought about starting small, with an investment property, then making a bigger purchase a couple years in once we have built some equity.
I guess what I’m asking is: Is it harder to get a mortgage on an investment property then a live in home?
Have you done it, did it work for you?
Any advice really.
Have you bought an investment property BEFORE your first family home?
Have you bought an investment property BEFORE your first family home?
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Money
5 Replies
DO IT. It is the smartest and best thing to do right now given the current rental crisis, interest rates and your position.
It is the smartest move you could make right now.
I don't know why people buy up big for their first home. Every generation before us has bought shit holes for their first home and worked their way up, over the last 20 years that has changed and we are wanting the best, biggest house in the best suburb and having no money for the next 20 years trying to pay for it. Personally I wouldn't buy it as an investment but I would buy a cheap house and actually make it your home, get whatever first home buyers grants available in your state and spend about 5 years smashing out the mortgage, doing renos then you will be set to sell and buy your dream home with ease.
It's called rentvesting. Where you rent (free or not) and buy a home where you want to live then rent it out to pay the mortgage. If done correctly it can be a very successful strategy. Especially if prices are rising faster than you can save.
You must do some basic research on property investing. There's all sorts of tax benefits and consequences (even if you sell years after moving in). Interest rates are usually higher as well for investment properties, but you can refinance when moving in yourself.
I'd be inclined to buy the house you'd live in if you don't intend to hold it as a long term investment. Buying and selling costs are horrific & costs like stamp duty, LMI, agent commission, solicitors fees, inspections, capital gains tax, etc. will likely wipe out any equity you've accrued. Look it up for your state.
Also, if a 500k property is your first purchase now, and an 800k property is in 12 minths, both rising by the same percentage a year, say, 10%, the 800k goes up 80k, 500k by 50k. You're still 30k behind AFTER the costs.
So have a really hard think about your end goal, and run the numbers for all scenarios. Interest rates WILL rise in about two years (banks saying, not me) so be mindful of that.
I will say I've never seen anyone where the clouds of a dream house stay fluffy and white for long when a huge mortgage is hanging above them. They turn to storm clouds very fast if it's sucking everything you have & you can't afford a life as well. Buy what you can comfortably afford now, not what you dream.
A lot of friends did this, while they were living with mum and dad and before they had kids or a family of there own.
Bought what ever they could afford and started from there.
Lots of people do