- Earlier this week we looked at the 4th of our top 5 strategies for thinking ‘outside the square’ in order to realise your Great Australian Dream of home ownership. In this blog (part 4 of 5) we look at our 5th & final alternative way to buy your first home.
If you missed any of the first 4 parts of the series please select the ones you missed below:
- Strategy 1: Short term pain, long term gain
- Strategy 2: Lean on your parents
- Strategy 3: Buy Now, Pay Later!
- Strategy 4: Team up with someone you can count on
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Strategy 5: If you can’t beat them, join them
We all know how dominate investors have been lately. That goes without saying really. So if you can’t beat investors as a first home buyer, why not be an investor yourself.
This method (known as rentvesting) allows first home buyers to enjoy the generous tax concessions available to other property investors in Australia. A ‘rentvestor’ is someone currently living as a tenant in a rented property, whilst being a landlord of a property that they own and rent out.
A growing number of young Australian’s have decided to take up this option as they understand how hard it is to outbid an investor who is aided by tax concessions that first home buyer owner occupiers are not eligible for. This method allows first home buyers to fight on a more level playing field and also, you may be able to buy sooner, as you may be able to afford a property in a cheaper area than where you need to live for employment and other lifestyle purposes.
Advantages
- This strategy will allow you to get into the market sooner, as your borrowing capacity is generally higher when you include the potential rental income in your borrowing capacity calculation. You may also be willing to buy a property as an investment in area you wouldn’t normally consider living in.
- This strategy will allow you to better compete with investors who may have been outbidding you when you were vying for a property as an owner occupier. You will also make use of the tax concessions such as negative gearing that are available to investors.
- You don’t have to compromise on where you want to live, as you can purchase the investment property in a more affordable location while you continue to live or rent in your preferred location due to work, lifestyle or other reasons.
- This strategy allows you to potentially build wealth while saving for your first owner occupier home.
Disadvantages
- This strategy may deem you ineligible for current & future Government grants & incentives;
- If you don’t buy the investment property in a good location, it could potentially lead to the property being vacant or not rising in value;
- It may force you to rent for longer as you will have to allocate some of your savings to fund the deposit of the investment property (& potentially loan repayments and loan repayents as well if you are not earning enough rent to cover these expenses);
- You will have to pay Capital Gains Tax (CGT) if you decide to sell the property for a profit in the future. Whereas if you ever decide to sell your primary place of residence, it is tax exempt (provided you never rented it out).
How can FHBA help with this strategy?
- Our FHBA Brokers would contact you to determine your borrowing capacity & minimum deposit requirements. They will stay with you throughout the borrowing (loan) process.
- If you are interested in buying a new property locally or interstate, we currently have access to 500+ projects for brand new homes / townhouses / apartments across Australia. Our ‘FHBA New Homes‘ service is backed by our New Home Experts who will meet you to discuss a range of options based on a fact find of your current situation and circumstances, all at no cost or no obligation to you.
- The FHBA Team, along with our Services Community, can help you with conveyancing, connection of utilities & even the landlord’s insurance (as well as other insurances you may need).
We hope you have enjoyed reading our 5 part series on alternative ways to achieve your Great Australian Dream of home ownership!
Get your complimentary, no obligation consultation today and find out how we can help you!
