First Time Builder

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 an Australian 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:

    • First, 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, colour palette, and garden.
    • You might be eligible for a First Home Owner Grant. While the amount depends on where you live, one thing is consistent across all states and territories – the grant isn’t available for investment properties.
    • It offers you stability: you can choose how long you stay in your home, and won’t need to re-negotiate rent each year.
    • When you eventually sell, you won’t have to pay Capital Gains Tax.

On the flip side:

    • You can’t claim any tax deductions on your expenses.
    • Interest rates can fluctuate and impact your repayments.

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 can 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 on your earnings.

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 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.