Hi All,
first home buyer here, & second post here on this forum.
Myself and my partner (not married – no kids) almost have a deposit for a $400k+
No debt, Clean credit and one is a fulltimer (me)
Total remuneration 65k and my partner is casual & part timer (she still makes more than me)
Would you:
a) buy 1 or 2 Investment properties under my trust & rent for a x amount of years this year.
b) buy a ‘home’ this year under my partners name, myself being the guarantee, and purchase an investment property next year through my trust.
Obviously i am not a professional and plan on getting more advice from those in this position to give, but for a more wealth creating perspective would option (a) be more viable? And if option (a) with rental income we would receive surpassing the rent fee that i will be paying to my landlord.
Would choosing option (b) limit the banks in lending me debt to a degree where it will be difficult for myself & partner to be approved a loan for an investment property next year?
Now without knowing the full numbers its very hard to make a decision given this is a forum. As well as there is a large amount of Pro’s and Con’s for each option.
I have to also take into consideration, if renting this year and we are unable to find an investment property or 2 that gives more cashflow than what we are paying our landlord, would not be the ideal situation.
Any answers are recommended, as this is a very open question on my behalf.
Thanks all,
Mehmet
Hi Mehmet,
That’s a very clearly stated situation – well done. As you say, there are Pros and Cons to be considered, but despite that, we may be able to point you forward somewhat. I’ll start by saying that to me, option A looks the better choice. Here’s why – it is a link to an earlier post on here that asks “Should I buy my own home, or an Investment Property, first?”
Note that there is a further link within that link – I wanted you to read the Introductory comments before going to the second link (which is the useful one).
Your later comments hold a lot of truth too:-
for a more wealth creating perspective would option (a) be more viable?
I believe it is more viable as you can claim expenses of an IP that help to reduce your tax paid when investing. An accountant can help more with that part.
Would choosing option (b) limit the banks in lending me debt to a degree where it will be difficult for myself & partner to be approved a loan for an investment property next year?
Contrary to above, you can make no expense claims on your own home costs. Banks therefore are likely to lend less for an “own home” than for an IP. And, as you say, if you take out a home loan first, it may well slow you down in getting your next property. By going for an IP first, you get any Capital Gain, and also the rental income that helps pay a loan and cover some expenses too. Ideally the rent should cover all expenses, but even if not, it is still (financially) better to buy an IP than an own home as the link above shows.
* Note – all my opinion only as I am not a professional adviser, Mehmet.
Benny
Gday Benny,
Cheers for including your thoughts on this dilemma. I believe the appropriate term for option (a) is ‘Rentvesting’
My choice is more in line with option (a) at current moment. Steps are underway for professional advice as everyones positions are very different.
I guess patience is what we must all look at as investors as key. I’ll do my do diligence and check out the links above
Thank you,
Mehmet
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