Investors ask: Buying where you can afford
Q. I'm currently renting in Sydney and I'm thinking of buying an investment home in a more affordable market to rent out. Do you think this is a reasonable plan and what will I need to consider?
It's one of my favourite plans, actually. I've dealt with a lot of first house buyers as opposed to first home buyers, and I think it's a great way to get into today's market without compromising on where you want to live or how you want to live.
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If you're working and paying tax in Australian dollars, then obviously there are quite a few benefits because you're getting the tax deducations on your investment property. That's a little bonus that first time property buyers don't think about because the whole world is revolving around being a first home owner.
In terms of not being able to afford the market you're living in, you can either consider purchasing a first property that's further out of town than where you currently live, or you can look at regional areas. Both obviously come down to price point and cash flow.
The general rule of thumb is that regional areas yield higher. If you can choose an area with tight vacancy rates and understand what surplus cash flow you have, you can make a decision to go for stronger growth in a capital city but perhaps move further out, or you can consider a regional option if the cash flows are a bit tighter.
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