Buying a home VS buying an investment property.
When it comes to buying a home versus an investment property, there is no one-size-fits all answer. As always with property investing, deciding what type of property to buy first depends on the individual – and, of course, on the numbers.
Emotions versus logic.
One of the biggest differences between buying an investment property and a home is emotion.
Most people buy their PPOR based on how well it suits their family and whether they feel at home in it.
It can be much easier to buy based on logic and numbers when it comes to buying an investment property – but using the same sort of approach when house hunting can be a good thing for your financial livelihood.
Putting the numbers first.
Nathan says, he is a big fan of numbers. He treats his investing like a business, but he also treats his home life like a business too.
If you can approach buying your home as a business decision, you can decide whether or not to buy a PPOR first, or buy some investment properties while renting instead.
It may be cheaper to rent a house in your preferred location than it would be to buy it. In this case, you may be able to build a foundation property portfolio that will improve your net worth as the years pass while living in a nice rental house that suits the needs of your family.
On the other hand, it may be more viable to buy a PPOR in a savvy way that will give you a strong capital base on which to build an investment portfolio in five years’ time.
Everyone is different.
Everybody’s position is different. Focusing on the numbers can give you a good idea which strategy will benefit you best over the long run.
Nathan says, he likes to look at the aspects of return and actual wealth. For instance, would you prefer to hold $2 million worth of investment properties or a $700,000 PPOR? If the market doubled during a ten-year cycle, you could potentially make $2 million on the investments without having a home that you own. Or, you could live in your own place and make $700,000 in capital gains during this time.
Some people may find the difference in wealth more important, whereas others may see having a home of their own as the deciding factor.
Where to from here?
If you need clarification on the best path forward, it is important to remember that we are not giving financial advice here. Nathan is not a qualified financial advisor, but we do have some good financial planners within the Binvested group.
Speaking with a qualified independent financial planner can help you identify the best way to achieve your financial goals.
Are you a rentvestor? Please share your experiences in the comments section below.
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