Should I buy an investment property or owner occupier property first? Part 2 of 2

Recent research shows that more first home buyers are purchasing their first home as an investment property rather than an owner-occupier property.

In 2015, 30% of first home buyers purchased their first property as an investment property according to research released to the public by Mortgage Choice.

With so many first home buyers now weighing up between purchasing their first home as an owner occupier property or alternatively as an investment property, we thought we would gather a few experts from our FHBA Services Community to explore the debate of, should you buy an owner occupier property first? Or an investment property?

The experts for this debate include:

  • Liz Sterzel, Director of Property Wizards
  • Scott Northcott, Director of Real Property Advice
  • Steven Jovcevski, Head of Referrals at Australia’s money saving zone, Mozo
  • Daniel Cohen, co-founder of First Home Buyers Australia
  • Taj Singh, co-founder of First Home Buyers Australia

This is Part 2 of the debate which goes through some unique factors to consider for both owner occupier and investment properties . For Part 1, please click here.


If I’m buying an owner occupier property first, what are some the important factors I need to consider?

Mr Scott Northcott from leading Queensland buyers advocate firm Real Property Advice offered his top 3 pointers:

  • “Make sure you do your figures on a higher interest rate as the long term averages are much higher than the current rates. It would be prudent to use a more realistic (larger) figure to do your affordability sums with”.
  • “Make sure it suits your needs. We all have a needs & wants list. You would be wise to place them in order of importance”.
  • “How long will you live in the property? Place this figure in years and then transpose that across your personal plan for that same time period”. Ask yourself “What basic functions change, like family, work or study, may impact on the suitability of the property?”

Like Mr Northcott, Managing Director of Perth buyers’ agency Property Wizards, Ms Liz Sterzel say’s “your financial situation & personal lifestyle circumstances” are key points to consider. However, Ms Sterzel also says you should still consider the investment credentials of an owner occupier property first, as while being the place you call home, it is also impacting your overall financial wealth. “Later, once the home has some equity, it can be used to borrow against for the first investment property, and this cycle then repeats as you start to build your portfolio”. Of course this is on the basis that you do want an investment property, but after you have purchased an owner occupier property first.

FHBA co-founders, Daniel Cohen & Taj Singh also brainstormed together the following top 3 points first home buyers should consider when buying an owner occupier property first:

  • Consider whether you are looking to buy a property that’s perfect to move into, or whether you are looking for a property you need to renovate. If you live in the property, you cannot claim renovation costs as a tax deduction. However, any improvement in the property value won’t be subject to Capital Gains Tax when the property is later sold.
  • When will you have to move into your property by? Make sure you purchase a property in time for your need to live in it (if you have a deadline). Remember, settlement periods usually apply before you can move in, often around 6 weeks.
  • You may want to consider purchasing a property with a spare bedroom (for future needs) & leasing this out to a roommate to help with the mortgage costs.

From a borrowing point of view, Mr Steven Jovcevski from Mozo says “first home owners purchasing a property to live in are eligible for the First Home Owners Grant (FHOG) if the property is new or bought off the plan and valued below the market value cap”.

“First home buyers may also be eligible for Stamp Duty concessions as well” said Taj Singh. Mr Singh adds “however, if you are purchasing an established dwelling, you will need to allow for Stamp Duty costs in addition to other property costs. It’s important you build this into your budget”.

Are you eligible for FHOG?

If I’m buying an investment property first, what are some of the important factors I need to consider?

As a starting point, Mr Northcott says “Much like your own home, you need to consider affordability”.

However, some of the more unique important factors Mr Northcostt says first home buyers should consider when buying an investment property include these 3 of his top pointers:

  • “The location and what is planned for the area or region. Are there lots of new properties coming to market or are you buying in a landlocked suburb?”
  • “Who is the target (ideal)? What are they willing to pay and how can you get them to pay more? Maybe a small internal change will make a large rental difference. So ability to know your target tenant market is crucial is the investment process”.
  • “What is your exit strategy? How will you know when or why to sell? What are the property performance indicators (PPI’s) that you will rely on to keen you updated on the performance of your property? You need a set of parameters around your investment and performance of it”.

FHBA co-founders, Daniel Cohen & Taj Singh also brainstormed together the following top 3 points first home buyers should consider when buying an investment property first:

  • How will you manage the property being tenanted? (most likely you will outsource this to a property manager / real estate agent).
  • Accounting & Tax – What are your anticipated cash inflows versus cash outflows? Can you afford this? You may want to employ an accountant who can help you establish a budget, a system for monitoring your cashflow and assist you with the tax implications of an investment property.
  • Vacancy rate – how likely are you to achieve a rental income

From a lending perspective, you need to remember when purchasing an investment property, you won’t be eligible for government assistance such as the first home owners grant. However Mr Jovcevski  points out “if you are purchasing a property for investment purposes, you still may be eligible to apply for the grant under the condition that you live in the property for the first 6 months”.

You also need to think about having a higher deposit then if you are purchasing an owner occupier property. “The introduction of the APRA investment lending requirements last year has seen some lenders cap investor loans at 80%, while owner-occupiers can still borrow up to 95% of a property’s value” said Mr Jovcevski. In addition “interest rates will likely be higher on investor loans as lenders seek to grow their owner-occupier loan portfolio”.

There is a lot to consider and we understand if you are overwhelmed.. If you aren’t quite sure what you want to do talk about it with friends & family to help determine your goals (what you want to achieve). If you need a helping hand, we recommend you speak with:

  • A mortgage broker – who can help you with your finance needs & questions.
  • A buyers advocate – who can help you with your property purchasing planning, questions & acquisition.

That’s it for this 2 part series. Which ever you decide (owner occupier or investment property) good luck with your property journey 🙂

Please note our website is in no shape or form designed to replace the need to obtain professional advice from experts such as Financial Planners. All information on our website is general & factual in nature, and should not be relied upon. In particular, we wish to remind you that the information in this article is not designed to replace advice. We always recommend you speak to a licensed professional before making any financial decision. Please visit our website Terms & Conditions for more information.


Not sure where you can afford? Try the new where can I afford tool on our website for free here.

Want the latest news & tips straight to your inbox? Join our FHBA VIP Club now!

First Home Buyers Australia
First Home Buyers Australia

Australia’s leading organisation specialising in assisting first home buyers achieve the great Australian dream of property ownership.