Choosing a Home Loan

Should your first property be an investment?

As property prices continue to increase and capital gains begin to look incredibly attractive as an investment stream, many young Australians are likely beginning to ask themselves how much they can borrow and whether their first property should be an investment.

It’s a good question, and one we aim to help you to answer!

Is it time to break open the piggy bank and make your first investment?Is it time to break open the piggy bank and make your first investment?

Rise of rentvestment

One in four young Australians still live at the parental home.

Have you heard the term “rentvestor”? It’s a neologism that is typical of the current property climate: People want to get onto the property ladder as soon as possible, but also want to earn passive income from a high-yield rental property. Rentvesting is the living condition in which you make a large investment in a cheaper property further out and lease it while continuing to rent in the city yourself to keep the metropolitan lifestyle.

This way, you earn capital gains on the growing property as well as a rental yield, which you then use to offset your own costs. CoreLogic RP Data shows a 10.52 per cent year on year median value rise for Sydney properties as well as a 3.4 per cent current gross rental yield – you can see how that is a tempting proposition for anyone trying to get onto the property ladder while remaining flexible.

A similar method is buying a property before you have actually left home. While you may still be paying rent to your parents, at least you know the landlords well! One in four young Australians still live at the parental home according to McCrindle research, indicating that this style of property investment may be starting to be used more commonly.

The main lesson for first-time investors

The key thing to remember is that any property is really an investment. When you buy the right home, while it may feel like you are making a loss with your mortgage repayments, you are actually aiming for longer term gains. The more equity and capital gains you have and accrue in your first home, the easier it is to upgrade later on down the line.

If there’s anything to be learned from the continued rise of real estate investment, it’s that it is key to take your first step on the right foot. The start of that is finding the right loan. Whether you buy to invest or buy to occupy, speak to your local mortgage broker today to find out how much you can borrow and start your property journey.

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