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Should I buy an investment property over a place to live?

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I’m finding it difficult to raise the money to buy a home unit in Sydney. I’ve read about people in mortgage stress paying over 30 per cent of their income on home repayments.

To buy a place reasonably close to work, I’d be in that stress situation. I’m thinking about buying an investment property instead. What do you think? I’m 28 and have a good job.

I think you’re being really sensible not putting yourself into mortgage stress.

Lots of people in your situation have actually shopped around for an investment property that they’d like to live in themselves and have bought the place with the idea of renting it out for few years to use the tax deductions from negative gearing to make it affordable. Then, as their incomes improve, they ultimately move into the property. There could be capital gains tax issues, but they can be minimised or even negated with the right advice.

Make sure the property is in an area where tenants want to live and check that the vacancy rates are low. If your job security is good and the property is one that would be in high demand, then you reduce your risks.

Also, many landlords use interest only loans, and some, for security, even fix their interest rates, but you can be a bit annoyed if interest rates fall. On the flip side, if they rise, you’d be pretty pleased with yourself.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Should I buy an investment property over a place to live?


Published on: Thursday, June 23, 2011

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