fbpx
1300 416 700
Home Loan Types The Team Calculators Learning Our Difference Get in Touch
Investing
Purchasing

Buy to live or buy to invest?

With prices constantly on the up, is it better to buy to live or buy to invest? Let’s look at how the two options stack up in a real-life scenario.

Assume we have a young professional couple purchasing a home for $1.43m. With a 10% deposit plus stamp duty, we’re looking at a loan amount of roughly $1,260,000.

Buy to live or buy to invest

At a 3.79% interest rate, repayments would sit at $5,863.86/month on principal and interest, or $3,979.50 on interest only. These are the costs of purchasing the property to live.

Buying to live is pretty simple – an owner occupier loan, with the owner moving in as soon as they purchase. The costs above are the real costs of living in that property.

Buying to invest involves purchasing a property and renting it out, then renting a cheaper property in which to live.

With the above scenario, if this couple was to rent out this apartment for $4,333, per month, this would leave them with a shortfall of $1,503 on the P&I option, or an additional $354 on the interest only option.

What happens next is really up to you – if you wanted to rent something of equal value, you might be able to negatively gear the property you purchased, creating a potential tax deduction for an investment with long term capital growth. Better yet, if you could get by renting something cheaper, you can work down that mortgage even faster then look to unlock some equity a few years down the track by refinancing, and purchase another property. Both options have tax implications being either income tax and/or capital gains tax so engaging your accountant for consideration of this matter is very important.






    Learning

    Related Articles

    First Home Buyers
    Guides
    Investing
    Mortgage Basics

    How to boost your credit score this year

    17 Jan 2022
    Purchasing
    Refinancing

    Intelligent Credit at Shore Private

    3 Dec 2021
    Investing

    Is Now The Right Time To Fix Your Interest Rate?

    19 Nov 2021
    Investing

    Property Rents Are Rising At Their Fastest Annual Rate Since 2008

    19 Nov 2021
    Purchasing
    Refinancing

    Shore Private – Our New White Label Product

    31 Jul 2021
    Guides
    Purchasing

    NSW Property Tax Proposal – All you Need to Know

    19 Jul 2021
    Purchasing

    Everything You Need To Know About Buying A Strata Property

    16 Mar 2021
    Guides
    Purchasing

    House Auctions 101: How to Prepare Ahead & Increase Your Chance of ...

    16 Feb 2021
    Guides
    Investing

    5 Key Points to Consider for Your Next Investment Property

    16 Feb 2021
    First Home Buyers
    Purchasing

    When will be the Best Time to Buy this Year?

    20 Jan 2021
    Market Trends
    Purchasing

    Australia Sees a Return of Buyers

    19 Nov 2020
    Guides
    Purchasing
    Refinancing

    How Is A Property Valuation Done?

    19 Nov 2020
    Guides
    Purchasing

    What Property Can I Afford?

    19 Nov 2020
    News
    Purchasing

    Budget 2020: What it Could mean for Sydney’s Property Market

    16 Oct 2020
    Purchasing
    Refinancing

    How to Purchase a Second Property Without a Saved Deposit

    16 Oct 2020