Talking Cents

Why we the small business accountant in Sydney think that a rental property is a better first investment than a live in home

If you are a first time buyer, congratulations on making the decision to enter the property market. This can be a particularly daunting decision given the amount of the investment you are making. The question of whether your first property should be an rental property or a home to live in is therefore a very pertinent one and we, the provider of small business accounting in Sydney, including Surry Hills and Zetland area, have a few pointers on what you should do with your first investment property.

Benefits of investing.

Past generations have traditionally worked years to save for a deposit, then taken their first step on the property ladder by buying a house to live in. This was usually achieved by making sacrifices as affordability back then was a big issue. Compared to buying for living in, with investing, you can avoid a few sacrifices (for example, not letting go of rental income) to get your first step on the property ladder. You will also be able to pay off loans better for an investment property than a live in house as a result of lesser compromises. Interest on investment properties is able to be claimed as a tax deduction. Lastly, you will have more equity to purchase a second property if you have invested in an area with high capital growth.

Is investing the right decision for you?

Investing requires you to make decisions with your head rather than your heart as you are buying a property that you are not living in. You cannot allow emotions to cloud your judgement. Your main goals should be rental growth year upon year and increased capital growth for the best possible sale price when you decide to sell it. You would also need to consider vacancies and if you are able to cover costs if the property remains tenantless for an extended period of time. You would also need to be wary of nasty tenants who cause more problems than good in the long run.

Final points to consider.

As the cost of buying a property is quite substantial, whether investment or live in, this means that you would need to hold on to the property for a significant period of time to reap any benefits. You also need to look at your own circumstances, for example if you are still a young professional living at home and saving on rent or if you are looking to start a family and how you will be able to manage the repayments.

Either way, you should research the area and the state laws and talk to your property agent and accountant to be fully informed before jumping into the property market. Investing may not be for everyone but it is a great way to get your first step on the property ladder. If you need to talk to an accountant before making this decision you could always contact us at m.a.s accountants, the small business accounting company in Sydney, Surry Hills and Zetland.