Should my First Home be an Investment Property?

If you’re gearing up to buy your first home, you might be wondering if your new purchase should be an investment property or one you live in. While we would love to give you some straight-up advice, there are pros and cons with either option, so let’s weigh them up.


Investment Property Cons

If you decide not to live in your first home, you will miss out on the first home buyers grant. Even if you build new, you won’t qualify for any assistance unless you live in the home within the first 12 months. In QLD this means no discount on stamp duty and no $15,000 for passing go. This little set back could cost you an extra $25,000+ all up.

Another con with an investment property is that you will have to get an investment loan, instead of an owner-occupied loan. The issue here is that firstly, you will need a bigger deposit. Banks tend to ask for a minimum of 10% for an investment loan, instead of 5% for owner-occupier. Secondly, you will likely pay more interest on the life of your loan. Banks often charge slightly more interest for an investment loan. It’s also worth doing the maths on what you’ll pay in tax, renting a property out is considered an income and you will need to take this into account at tax time.


Investment Property Pros

An investment property can be a great idea if you’re in the right circumstances. If this isn’t your first home, then you aren’t missing out on any first home buyer benefits which makes this a fairly equal option. One big pro to buying an investment is if you can’t afford to buy a home where you live. If it’s not realistic to expect to buy a place where you live, then buying an investment somewhere heaper is a great option for you. A great example of this is people who live in Sydney and have been priced out fo the market, can buy an investment in Brisbane where it’s a bit cheaper.

Having an investment property that is correctly selected, also may mean more financial freedom. If your property is is a high demand rental area and is constantly rented out, then you are paying off home without actually having to pay the full mortgage. This means you can carry on living life as if you didn’t have huge bills.


Owner Occupier Cons

There are some cons of choosing to occupy your first home. To qualify for an owner-occupier loan, you have to live in the property (obviously). This means you have to pay the whole mortgage as you won’t be getting income from a tenant (unless there’s a spare room you can rent out). It also means that you can’t choose your house based on a good investment location, because you need to buy a place where you want to live which isn’t always the most financially sound choice.


Owner Occupier Pros

There are a lot of pros to living in your first home. As a first home buyer that lives in their home, you qualify for the first home buyers grant, and a discount on stamp duty. This is a huge pro. This could end up saving you over $25,000! You will also pay less interest than you would if you had an investment loan, saving even more money. Another benefit of this type of loan is that most lenders will allow a 5% deposit, unlike an investment loan where you will need a minimum of 10%. This means you literally only need to save half of the amount that you would for an investor loan.

A great advantage of living in your home is that you can make whatever changes you want to without asking someone else’s permission. If you bought an investment property, you would still be living in someone else’s home following their rules.

There is a way to have the best of both worlds. You could build your first home in an area that is predicted to do well growth-wise, that way your home value is going up while you are living in it. If you had a spare room, you could even rent it out to help pay the mortgage quicker.


So what should I do?

At the end of the day, you need to weigh up what’s right for you. Based on your circumstances, which option has more pros than cons?

Just remember that you will also need to build new to qualify for the $15,000 from the QLD government. To qualify for an extra $15,000 on top of all that, you can build your home through First Home Hero. To see if you’re eligible, apply here.