Could you benefit from buying an investment property before your first home?

The Australian property market is becoming increasingly accommodating for investors to make moves into, especially in metropolitan regions like buying rentals in Surfers Paradise. However, one thing that has also occurred simultaneously is the dropping off of first home buyer numbers. This comes down to a number of factors, including rising prices, housing supply and finance issues. 

However, an increasingly popular move being seen across the nation is the shunning of traditional thinking about property. Instead, people are beginning to buy investment real estate ahead of their own home, helping them build a property and asset portfolio while also earning rent from their investments. There are a number of benefits to this, which could be useful for first time buyers to achieve their own slice of residential real estate in the future. 

Could this be a good avenue for you?

When it comes to buying investment properties as a renter, there are some thing to consider before pursuing this avenue. The basics are this: When buying an owner-occupier property, you gain no income from the property, there are no tax deductions, there's the risk of little to no capital growth, and you still have to make regular repayments on your home loan. 

However, buying an investment property is all about making your finances work for you. When it comes down to it, building a portfolio could be the best move to make before securing your own home. Cash-flow positive investments provide an income from the property in the form of rent, which outweighs associated costs. Furthermore, smart investors can buy in areas projected to have major capital growth, allowing them to potentially have an asset growing in value over a long period of time. Owners of rental properties can make deductions, lowering their taxable income, too.

Taking out a home loan for an investment property also has the benefit of building wealth in your asset as you make repayments. This is known as home equity and can be used for a variety of different things in the near future. This is one of the key benefits of purchasing an investment property before your own home. 

While you're still renting, the income from your investment property should go straight towards paying off your investment home loan – allowing the house to effectively pay for itself. However, in the long term, you can also access this money through a home equity loan, which can then be used as a deposit on your own "first" home. 

However, it's important to remember that this is a long term plan. It may be difficult adjusting to the new system and juggling all your finances, but keeping on top of it and having your plan set in concrete can help you to secure the future you've always wanted. Seeking professional advice is also smart, with insight tailored specifically towards your local market and the growth potential for the region. 

But what about the First Home Owners Grant?

If you decide to purchase investment property before your own first home, you will no longer be eligible for the First Home Owner Grant offered. While this is a great help for people looking to move straight into their own house, if you decide to pursue the investment property route, chances are you won't need the added incentive.

As you're home begins to accumulate value, you'll potentially have access to a higher amount of money in the first place. However, this success depends on doing thorough research and finding the perfect location for your investment – somewhere with a lot of future growth potential to ensure the property will continue to provide income well into the coming years.