SHOULD YOU BUY A HOME OR INVESTMENT FIRST?
Generation Y faces a question that their parents never had to consider: should we buy a home, or something more achievable like an investment property first? For many average income earners, buying a principle place of residence that ticks all of the boxes is but a mere dream. Purchasing an affordable investment property, on the other hand, holds much more potential …
NATHAN BIRCH – TRUMPING IT AT 150 INVESTMENT PROPERTIES BUT NO HOME
Nathan recalls a time when he was referred to as “the Donald Trump of Sydney.” As a successful young investor, he had built an empire of 150 properties. Ironically, he was still living in rental accommodation at this time.
For Nathan, investing was a business strategy that would enable him to acquire land on which to build his dream house – not just any run of the mill home, but “2,200 square metres of fun.”
THE LOGIC OF NUMBERS VERSUS THE EMOTION OF DESIRE
Nathan explains his decision to build an investment portfolio before purchasing his own home with the following analogy:
Say, you had $500,000 in cash to spend on a car. You could buy a Lamborghini, or you could buy 20 Ford Falcons and send them out as taxis. With the income generated from your fleet of taxis, you could buy yourself a Lamborghini, you could buy yourself a yacht, you could buy yourself a …
So it is with property investing. By treating it as a business and making sure it yields an income and creates a strong capital position, you will be setting yourself up with much more than whatever PPOR you can afford at the time.
WHAT ABOUT THE “AUSTRALIAN DREAM” OF HOME OWNERSHIP?
Many people get caught up in the emotion of desire. They want to own their own house in which to live, dream and raise their children. They purchase whatever they can afford at the time and work for the next 30 years to pay it off.
The home never pays them an income but it does go up in value over time. Then again, so does every other house in that area.
ESCAPING THE HOME OWNERSHIP NIGHTMARE
By building an investment portfolio first, you will be setting yourself up with an asset base that gives you a strong net worth position. This may enable you to buy a better home than what you could have on your starting deposit.
Further down the track, you may be able to pay down debt and have some unencumbered remaining – leaving you with a rental income stream that will pay your home mortgage for you, or allow for an early retirement, a bi-yearly holiday or a more enjoyable lifestyle.
Have you purchased an investment property before buying your PPOR? Please share your experiences in the comments section below.