Property: Invest now or later?
Should you keep trying to save money to buy your own home or invest now?
This is a question we get asked quite regularly and the answer depends on a number of factors.
The top three concerns are:
- How fast can you save?
- How quickly is the market moving?
- What is your long-term strategy?
- How fast can you save?
I can’t answer that for you but a simple exercise is to look at how much you have saved already and how long did it take you?
Do you have a budget? Creating a budget is a really good way to have clear visibility over all your expenses. It also clarifies what your expenses are compared to your income. Once you know what your surplus or deficit is, you can start to plan.
Think about what your priorities are. Some people want to save all their money quickly to have enough for a house deposit. Other people want to fit this goal in with some other smaller goals, like going on a holiday or buying a new car.
There are some great online resources available for budgeting. One I like to recommend is the free tool available through the Australian Government Money smart website.
HINT: Take this opportunity to review all your automatic subscriptions? Do you need both Amazon Prime and Spotify or would one service be enough for all your needs? What about utilities? Could you negotiate a better deal with your electricity provider, or would you get a discount if you paid via direct debit? Little changes can really add up.
- How fast is the market moving?
If you are wanting to buy in a rising market, you might find that the more you save, the more the market moves, meaning you can never quite catch up. This is particularly relevant to our investors who want to buy in expensive cities like Sydney.
This is so disheartening. When this is the case, it is worth considering investing in a different market that is more affordable and to let the capital growth do the ‘saving’ or capital growth for you.
You can then later utilize the equity growth to put in the deposit for your home. Many of our Sydney and Melbourne clients employ the ‘rentvesting’ strategy, where they rent where they want to live and invest to make money.
An added benefit is the tax minimisation you’ll likely enjoy through our tax system. Paying less tax to start your property portfolio? Sounds good to me.
- What is your strategy?
There are three main strategies that our clients look for with their property investments. Tax minimisation, security in retirement, and taking advantage of government incentives for first homeowners.
Generally speaking, property is a long-term game and we don’t encourage speculation, so setting up your strategy for portfolio growth is important. For some clients, investing through a trust is the best structure to ensure ongoing growth, however this is a matter for your accountant and lawyer to discuss.
There are lending implications as well, and a good finance broker can take you through the specifics as it relates to your circumstances.
Key takeaways: Work out what your goals are, then the strategy will follow. If you keep saving and still can’t get into the home you want, considering investing in a good property in a high-growth area can be the fastest way to move into your dream home sooner.
If you need help in making a decision I would recommend speaking to a good finance broker as well as your accountant. A financial planner and property lawyer may also be needed and of course, you can trust the team at Calla Property to recommend the best property for investment purposes.