Can you afford to buy where you want to live?

Perhaps you’re renting in an expensive neighbourhood, it might be close to the city or somewhere near a beautiful garden or beach.

The difficulty is that while you can afford rent in your current suburb, you may find that you can’t afford the kind of house you want to live in long-term with your family. This may be because the deposit or mortgage repayments are prohibitive or because you’re finding it hard to obtain that level of financing approval from the bank.

Is the area a good investment?

When you’re considering where you want to live, you might be thinking of a big block with a back yard surrounded by trees and fresh country air. You’ll be thinking about things like is it close to good schools and can I easily get to work from that location?

Whereas, with an investment property, you might need to emphasise things like the potential for growth in the suburb, population changes and access to transport hubs. You will also have to think about how much rent you’re likely to be able to charge for the property versus how much the property might be worth.

Some investors enjoy purchasing investment properties because it can offer more flexibility. You don’t need to look for a house with three bedrooms, a study and a large kitchen. Instead, you can focus on its investment characteristics because you won’t be living there.

Is there any assistance available?

There are currently a number of government packages available to help people who are looking to buy their first home or build a new home, for example:

• $25,000 HomeBuilder grant for first home or subsequent home builders as part of the government’s COVID-19 support packages. There are qualifications in relation to the eligibility of this grant, including that you need to enter into a building contract between 4 June and 31 December 2020. You must also commence construction within 3 months of the contract date.

    The money must be put towards your principal place of residence (no investment properties) and there is an income test for individuals ($125,000) and couples ($200,000). (more information here).

• $20,000 First Home Owner Grant for regional areas (more information here).

• $10,000 First Home Owners Grant (more information here).

• First home buyer stamp duty exemption (no stamp duty on properties worth up to $600,000 and a 50% discount on properties worth up to $750,000) (more information here).

Whilst you may not be eligible for these grants if you choose to buy an investment property, you can still use your rental repayments to help you pay down the mortgage. You may also be able to claim tax deductions on some of your eligible expenses. These two factors can be useful to investors looking to get their foot into the property market.