Should I buy my own home or an investment property first?

It depends on your circumstances, and there is no universal answer. The question to work through is what each option does to the next decision: buying a home near the city can use most of your borrowing capacity, while buying an investment property first and renting where you want to live can keep the plan moving. Either order can be right. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

Renting where you want to live and buying an investment property where the numbers work. It is common among people whose work and life are in expensive inner-city areas where buying is out of reach, and it lets them hold property while living where they choose. Our rentvesting guide covers it in depth.

What should I consider before buying an investment property first?

Whether it affects your eligibility for first home owner grants or stamp duty concessions in your state; the responsibilities of being a landlord; that property is illiquid and a long-term holding; and whether the cash flow and buffers work through a rate rise. A budget and independent advice come before either decision. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

Does buying an investment property first affect first home buyer benefits?

It can. Grants and concessions differ by state and territory and often depend on whether you have owned property before and whether you will live in the home. Check the current rules for your state before deciding the order, and confirm them with your conveyancer or adviser. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

How does the order of purchases affect a portfolio?

The same sequencing principles apply whether the first property is a home or an investment. Each purchase consumes deposit and borrowing capacity, so the first one determines how soon the second is possible. Working out the order first is the whole point of strategy before property.

Can Get RARE help me decide?

We can work through your position on a strategy call: what you can borrow, what you can save, where you want to live and what you want the next ten years to look like. If the right answer is to wait, we say so. The decision about your own money stays yours and your adviser's. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

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Your own home or an investment property first?

Key Considerations Before You Pick One.

There is no doubt that homeownership remains to be the most significant Australian dream. But with changing lifestyles, career paths, and affordability, more Aussies are choosing to buy an investment property before buying their first home.

They want to live close to the capital city centre where most work is, and fun happens. But living in those places comes with a hefty price. When you want to purchase property near or close to the city is becoming increasingly difficult for buyers and most especially for first home buyers. So young professionals opt to rent in their desired location and buy an investment property where they can afford but don't want to live. This sentiment created the strategy of purchasing an investment property so they can save up to buy their first home and live in their desired location.

Young professionals have come up with the word that suits their lifestyle, "rent-investing". It allows the investor to have the flexibility of living where they want, the opportunity to travel and at the same time growing their wealth. Our complete rentvesting guide explains exactly how this strategy works, including who it suits, how to structure it, and the specific scenarios where it outperforms buying your own home first.

When you are a tenant, and you see your friend buys the property and pays for the mortgage, the feeling for remorse is bound to kick in. Why pay for the landlord's mortgage when you can choose to pay for your own? This is a good question, especially when the interest rates are so low, and there are numerous Government schemes for first home buyers.

If you're reading this blog, you probably are weighing your options of purchasing a property. Should you purchase your home first or an investment property? Here are some of the reasons why your rent-vesting could be the best move for you.

1. You are financially better off

Now, when you receive rent in one hand and pays from another should leave you with similar end-result? Surprise, surprise, no. Financially, you will be better off. Tax benefits, including negative gearing and depreciation, will help you come better off. This additional saving may help you build your wealth sooner, everything being equal. It can also provide you with an excellent opportunity to build wealth through long term capital appreciation as you can practically follow the booming market for your investments.

Our guide on the hidden risk of not buying property covers an important counterpoint, the long-term cost of delaying investment while waiting to first own a home.

2. Freedom of choice

For some investors, the thought of being tied to a mortgage and unable to move when you want to isn't ideal. If you are one of them, owning an investment property allows you to move and change addresses any time. Should circumstances or preferences change, rent investors also have more control over their budgets as they can upgrade or downgrade relatively easily.

3. Live the lifestyle you want

If rental prices work for you, you can live in your dream house without needing to compromise on the location, features and your lifestyle. Rent-vesting can give you the opportunity to skip being tied down to a long term commitment mortgage to pay it off quicker. Our finance and structuring pillar is also relevant here: the PPOR vs investment property decision has significant implications for how debt is structured and how borrowing capacity is managed going forward.

Things that you may want to consider

Before you adopt the rent-vesting strategy, you need to keep these things in mind:
Have a budget and seek independent and accounting advice from experts to ensure your approach achieves your goals.

Understand the risks and benefits of property investing: research about the responsibilities of a landlord and illiquid nature of property investment.
Make sure to look out for your eligibility if you buy an investment property first in your state or territory's first homeowner grants or stamp duty concessions
Track your investment property's cash flow and capital growth, and always keep in mind that property investment is a long-term wealth creation strategy.

Is rent-vesting the right move for you?

With the information we've gone through into consideration, should you buy your home or investment property first? It depends on your circumstances. So before making a decision, do your due diligence and find out which strategies work best for you. Our portfolio strategy and sequencing guide covers how the buy order logic applies regardless of whether your first property is a home or an investment; the sequencing principles are the same.

If you are unsure what options are the right ones for you, we're here to help you by giving expert advice on properties. If you're in this exact situation, capable of acting but uncertain whether to buy your home or invest first, our Start Here page and short diagnostic are the right starting point.

About the author

Rasti Vaibhav is the founder of Get RARE Properties, an independent buyer's agency for property investors. He is a CFA Charterholder and spent more than nine years managing institutional portfolios at Westpac and AMP Capital before founding the firm in 2020. He sits on the REINSW Buyers' Agent Chapter Committee and is the author of The Property Wealth Blueprint.

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