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Can I Buy Investment Property Before First Home? Explained

can i buy investment property before first home
Can I Buy Investment Property Before First Home?

When I initially entered the Australian property market, I encountered a dilemma: I contemplated purchasing an investment property before acquiring my first home. I’m sure it’s a situation most of you are in, and the solution is not straightforward. There are pros and cons to both options that I will cover today. Ultimately, it will depend on your financial goals and personal circumstances to see which option is best for you.

On one hand, buying an investment property can be a smart financial move. It allows you to start building wealth through property investment and generate rental income. However, investment properties can be more expensive than a first home. In addition, you may need a larger deposit to secure a loan. Additionally, you may miss out on first home buyer grants and other incentives that are available for those purchasing their first home.

Ultimately, the decision to buy an investment property before your first home is a personal one that requires careful consideration. You need to weigh up the financial benefits and drawbacks of both options and seek professional advice before making a decision.

Investment Properties Basics

Investment properties are residential or commercial properties that are purchased with the intention of generating income or profit. As a first home buyer, you may consider buying an investment property before purchasing your primary home. This can be a great way to start building your property portfolio and work your way up the property ladder.

Benefits of Investment Properties

One of the main benefits of investment properties is the rental income they generate. Rental income is the amount of money you receive from tenants who rent your property. This income can help you pay off your mortgage and other expenses associated with owning an investment property.

Another benefit of investment properties is the tax benefits they provide. As a real estate investor, you are eligible for tax deductions on expenses such as mortgage interest, property taxes, repairs and maintenance. These deductions can help reduce your taxable income and lower your tax bill.

Negative gearing is another tax benefit that real estate investors can take advantage of. Negative gearing is when the expenses associated with owning an investment property exceed the rental income it generates. This loss can be offset against your personal income, reducing your taxable income and lowering your tax bill.

Types of Investment Properties

There are several types of investment properties you can consider. Residential investment properties include single-family homes, rental properties and vacation homes. Commercial investment properties include office buildings, retail spaces and industrial properties.

When choosing an investment property, it’s important to consider your investment strategy. Are you looking for a property with high capital growth potential or one that generates steady rental income? Your investment strategy will help you determine the type of property that’s right for you.

Should I Buy an Investment Property Before First Home

If you’re a first-time homebuyer, you may be wondering whether you should buy your first home or an investment property first. Both options have their pros and cons, and the decision ultimately depends on your personal financial situation and goals. In this section, I’ll explore the advantages and disadvantages of each option.

Pros and Cons of Buying First Home


  • A Place to Call Your Own: Owning your own home is the Australian dream for many people. Having a primary residence that you can call your own provides a sense of stability and security.
  • Rising Property Values: Historically, property values in Australia have risen over time. By purchasing your first home, you may be able to take advantage of this trend and build equity over time.


  • High Upfront Costs: Buying your first home can be expensive, especially if you need to take out a home loan. You’ll need to save up for a deposit, pay for stamp duty and legal fees, and cover other expenses.
  • Limited Flexibility: When you own your own home, you’re tied to a specific location. If you need to move for work or other reasons, it can be difficult to sell your home quickly and for a good price.
  • No Passive Income: Unlike an investment property, your primary residence won’t generate any passive income. You’ll need to rely on your job or other sources of income to cover your expenses.

Pros and Cons of Buying Investment Property


  • Rentvesting: One popular strategy for first-time homebuyers is to buy an investment property first and rent in the area they love. This allows them to gain the benefits of owning real estate while still enjoying the lifestyle they want.
  • Potential for Passive Income: By purchasing an investment property, you can generate rental income. This income can help cover your expenses and even provide a source of passive income.
  • Tax Benefits: As a rental property owner, you may be eligible for tax deductions on expenses related to your property. For example you can claim interest on your investment home loan, council rates, maintenace and property taxes.


  • Potential Risks: Investing in property comes with risks, just like any other investment. You’ll need to carefully research the market and choose the right property to ensure that you make a good return on your investment.
  • Lower Rental Rates: As a first-time buyer, you may not be able to afford to buy in the most desirable areas. This means that you may need to purchase an investment property in a less desirable area, which could result in lower rental rates and less income.
  • Not Your Own Home: Unlike purchasing your own home, buying an investment property means that you won’t have a primary residence to call your own. This may not be an important factor for everyone, but it’s something to consider.

Ultimately, the decision of whether to buy your first home or an investment property first depends on your personal financial situation and goals. It’s always a good idea to consult with a Property Mentor before making any major financial decisions.


Financial Considerations

When considering buying an investment property before your first home, there are several financial considerations to keep in mind. Assessing your borrowing power and the impact of interest rates on your decision are two key factors to consider.

Assessing Your Borrowing Power

Before you start looking for properties, you to assess your borrowing power. This will give you an idea of how much you can afford to borrow. In addition, you would know what kind of property you can realistically afford. Factors that impact your borrowing power include your income, savings, and debt. Contact us today so that we can assist you to determine your borrowing power.

Mortgage lenders will typically look at your income and expenses to determine your borrowing power. They’ll also look at your credit score and history to assess your risk as a borrower. If you have a high level of debt or a lower credit score, you may find it harder to borrow money for an investment property.

The Impact of Interest Rates on Your Decision

Interest rates can have a significant impact on your decision to buy an investment property before your first home. Higher interest rates can make it more expensive to borrow money. Consequently, this can impact your monthly cash flow and ability to make mortgage payments.

When considering an investment property loan, it’s important to shop around and compare different financing options. Contact us today and one of our associated mortgage brokers can help you find the best mortgage loan for your financial situation. They will take into account factors such as your income, deposit and credit score.

It’s also important to consider the impact of interest rates on your investment property over the long term. Higher interest rates can increase your monthly mortgage payments and reduce your overall return on investment. However, if interest rates are low, you may be able to secure a better deal on your investment loan.

Market Research and Location

When it comes to buying an investment property, market research and location are crucial factors to consider. Here are some tips to help you make the right decision.

Analysing Property and Suburb Reports

Before you invest in a property, research the real estate market and property values in the area. You can do this by looking at property reports, such as those provided by local real estate agents, online real estate websites like www.domain.com.au or property research houses like www.sqmresearch.com.au. These reports will give you an idea of the current property prices and capital gains in the area. They will also provide important information like the vacancy rates and rental rates.

In addition, you need to research the suburb you’re considering. Look for suburbs in your capital city that are growing in popularity and have good amenities, such as schools, public transport and shopping centres. Check the crime rates and the overall safety of the suburb, as this can affect the value of your investment.

Choosing the Right Suburb

When choosing a suburb, consider the potential buyers or renters. Look for suburbs that are popular with young professionals or families, as they are likely to have a higher demand for rental properties. This will ensure that your investment property has a good chance of being tenanted and generating rental income.

Consider the operating expenses of the property, such as maintenance costs and strata fees, and factor these into your financial calculations. You should also have a good understanding of your financial stability and be able to afford the purchase price and ongoing expenses of the property.

By doing your research and choosing the right suburb, you can make an informed decision on whether buying an investment property before your first home is the best option for you.

Managing Your Investment

Once you have purchased your investment property, you now need to manage it effectively to ensure that it remains a good investment for you. This involves a number of different factors, including finding the right tenant, understanding maintenance costs and engaging a property manager.

The Role of a Property Manager

One of the key factors in managing your investment property is engaging a property manager. A property manager helps you with a range of tasks. These include finding a new tenant, collecting rent and dealing with repairs and maintenance issues. They can also provide you with advice on how to maximise your rental income and ensure that your property complies with fair housing laws.

When choosing a property manager, consider their experience, qualifications and reputation. You should also ask them about their fees and what services they provide. Ultimately, make sure that you feel comfortable working with them.

Understanding Maintenance Costs

Another important factor in managing your investment property is understanding maintenance costs. As a landlord, you are responsible for maintaining your property and ensuring that it is safe and habitable for your tenant. This includes ongoing maintenance tasks such as cleaning, gardening and repairs. There can also be more significant repairs such as replacing a roof or fixing a plumbing issue.

To ensure that you are prepared for these costs, have cash reserves. In addition, factor in ongoing maintenance costs when calculating your rental income. You should also consider taking out homeowners insurance to protect yourself against unexpected repairs or damages.

Overall, managing your investment property requires careful planning and attention to detail. By engaging a property manager, understanding maintenance costs, and keeping an eye on your investment portfolio, you can ensure that your investment property remains a good investment for years to come.



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