Buy or invest. The Australian property market can be a nightmare if you don’t know what to do. So what do you do with your hard earned money? If you’re staying with family, you can safely invest while getting rental returns and not have to worry about your own income. Not everyone has this luxury, however, and we need somewhere to live ourselves.
Let’s break down the two options and see what suits you best.
Buying to live
If you’re buying for yourself, you’re considered an owner occupier. There can be personal reasons for buying to live. If you own the place, you’ll have a lot more long term security. If you’re just starting a family, your children will want to go to the same school, make friends. Your job security is very stable and you want to live in the area.
The main calculation for owner occupiers is much simpler than for investors renting themselves. Your salary minus the mortgage interest repayments.
After that, you need to factor in your cost of living, and budget accordingly. Remember to always give yourself a buffer, and consider non-monthly expenditure, such as car costs (services, registration, insurance), school fees (if you have children) and so on.
Buying to invest
If you’re buying to invest, you’re also going to have to find somewhere to rent yourself. Buying to invest can be slightly trickier, because if you want to take advantage of government incentives such as the first home buyers grant, you need to be living in the property yourself for 6 months. If you’re already currently renting, you’ll have two properties, which equals twice the rent. If you live exclusively in your new place, you’ll have to move out of your current residence, and find a new one once you’re ready to move out again.
If you’re not sure of where you want to live, or you might be moving around a lot for work (or a long holiday), renting might be the way for you, as you have a lot more flexibility and no need for permanence.
Buying to invest can also be a good idea if you have the extra capital, too. If you have the cash to invest, you can see good returns and safeguard your money, as it’s a very safe investment.
If you’re looking to invest, one of the main criteria you’re looking at is capital growth and rental yield. This is purely a money making investment, and the extra features of the house are just there to get you a better return on your money.
The main calculation you’ll have to make is your salary plus the rental return against your rent and your loan/interest repayments. Again, as before, you’re going to have to factor your regular cost of living expenses to keep up.
Again, make sure you’re factoring in your basic cost of living costs, as well as any expected costs and bills that aren’t regular monthly bills, such as electricity and water, insurance, medical checkups, etc.