Designing your home

Buying a first home vs investment property

If you’ve been busy saving for a deposit, you might be wondering about the pros and cons of buying a first home vs an investment property. While owning your own home has long been considered the American dream, there are many advantages in purchasing an investment property to rent out to someone else. Let’s take a look at the benefits of each approach.

A home of your own: buying a first home

Buying a home to live in is appealing for many reasons:

  • Firstly, living in a house you’re paying off is emotionally rewarding. You don’t need to ask permission to buy a dog, paint the walls, or hang a picture. This gives you freedom to infuse your personality into its styling, color palette, and landscaping.
  • You might be eligible for a First Time Buyer Loan, commonly known as an FHA loan..
  • FHA loans typically offer much lower down payments with assistance for qualified buyers and lower minimum credit scores.

The bottom line: purchasing an investment property

Buying an investment property requires objectivity and lots of research. On the plus side:

  • By renting out your property, you’ll generate cash flow that can help pay off your mortgage.
  • Your choice comes down to investment potential rather than emotions: that is, how much rent you’re likely to earn, and how much the property will increase in value.
  • You may be able to claim a tax deduction on many expenses, such as interest on the loan and property maintenance.
  • You’ll have the flexibility to look at areas in which you may not want to live, but that have great investment potential.
  • If your property is negatively geared – or generating less income than it costs – you can reduce the amount of tax you pay.

It’s also worth noting that:

  • It takes time and energy to manage the property and find the right tenants, so you might want to appoint a property manager.
  • If you sell your investment property and make a profit, you’ll likely need to pay Capital Gains Tax.
  • You’ll still need to pay rent on the property you live in.

A Final Word

Choosing whether to buy your first home or an investment property isn’t clear-cut. G.J. Gardner Homes can help you weigh up your options, and give you advice on building a dream home for your own use or partnering with us for your investment project.