A question I’m often asked is whether people should buy an owner-occupied property first or an investment property. What most don’t realise is that it might be possible to do both. A client could purchase a property that needs a cosmetic renovation, add value to it and then leverage into the world of investing.
BY JAMIE MOORE
Accessing this newly created equity means they could fund a deposit and costs on their first investment purchase. With this strategy, the client also gets to take advantage of government bonuses like the First Home Owners Grant (FHOG) and stamp duty concessions.
As an example, take Mike and Kate who recently purchased a $400,000 property in the Australian Capital Territory. They were able to take advantage of the $7000 FHOG and concessionary stamp duty (which was only $5000). Using a 10 per cent deposit, they took out a loan of $360,000.
After a couple of months of carrying out cosmetic renovations on their first home, which included new paint and flooring, new kitchen cupboard doors and sink, light fittings, window furnishings and landscaping, their property was revalued at $450,000.
They were then able to increase their loan back up to 90 per cent of the new value and access $45,000 in equity. This equity was used as a 10 per cent deposit (plus costs) on their first investment – a property across the border in Queanbeyan.
This strategy isn’t for everyone. Some people may not be in a position to afford the holding costs on their own home and an investment property. Others may prefer to rent in a particular location they enjoy or live at home while investing.
Either way – having your cake and eating it too, or in this case buying a first home and an investment property, is a possibility.
This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.