Jumping into the property market can be done in two ways – purchasing an investment home or buying your own abode.
According to Mark Hay Realty Group Principal Mark Hay, one of the best investments anyone can make is buying and living in their own home.
“The most obvious benefit is that it is capital gains tax free. There is no capital gains tax because it is your principal place of residence” he said. “There are some people that trade homes every couple of years – they shift , do it up, sell, pick up the profit and do it again and again, and they don’t pay capital gains tax.
“Whereas, with an investment property, 50 per cent of the gain is taxable and, if you sell it in under 12 months of acquisition, it is 100 per cent”
Mr Hay said another reason your main residence was a good investment was the minimal funds needed at the beginning.
“You can do it through Keystart, where you can qualify and only pay a two per cent deposit. It is far less to get started, with the most you need being a five per cent deposit” he said.
“When you buy an investment property, you need 20 per cent, so you have to save longer”
As Western Australia’s real estate market continues on its upswing, Mr Hay said it was cheaper to pay off a home loan than pay rent.
“Thanks to the 50-year, all-time low interest rates and high rents, in some cases, it is cheaper to pay your own home repayments than rent” he said.
“There is a very strong probability that wherever you’re purchasing, it’ll cost you more to rent it than it will to actually own it”
Along with the advantage of hopping off the merry-go-round of renting, Mr Hay said a benefit to acquiring your own home and living in it was the value-adding improvements people often made.
“You can improve and add value to the property yourself through landscaping, painting and general handyman work” he said, adding that as the home’s value increases, you can borrow more against it to use as leverage for your next property.
“As you add value to your home, pay off your principal from the mortgage and have time increase the value of your property, your equity increases, which can then be re-mortgaged to finance you into investment properties.
“Your own home can be a great investment and a good cornerstone in which to commence your path to wealth creation”
For those ready to take the plunge and purchase a home, Mr Hay said it was critical to do your research.
“Go and speak to a mortgage broker or a bank manage, and they will tell you what you should do to get your finances in order to get a good credit rating” he said.
“One of the biggest offenders is online shopping and phone bills – when you miss or don’t make a payment, you get a black mark against yourself and it impacts your credit rating.
“Try and keep a squeaky clean credit rating and talk to someone who can advise you on what you should be doing to best prepare yourself”
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(Published – 23/04/2022; Author – Anthony Matteo)