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Finding the Perfect Balance: Choosing Between Your First Home and Investment Property

By Coposit
5/7/2023

It’s a common question that first home buyers are faced with, their first leap into the market can be a daunting one. Do I throw myself into buying my first home, be that a house, apartment, or many other options out there, or do I instead stay where I am and buy an investment? 

Both have distinct advantages – let’s take a look at both. 

Buying your first home 

Picture this scenario. You’re in your early 20’s, you’re getting pretty tired of living at home with the parents or sinking your money down the drain in rent, and you’ve worked hard to save up enough for a deposit on a home. It might be so appealing to consider buying a property at this stage of your life for several reasons. 

First and foremost, buying your first home can provide a sense of stability and security. It offers a place to call your own, a space where you can express your personal style, and the freedom to make changes and improvements as you see fit. Owning a home gives you a sense of pride and accomplishment, and it can be a significant milestone in your journey towards financial independence. 

Additionally, buying your first home home can be a wise long-term investment. Real estate has historically shown appreciation over time, and by buying a property early on, you have the potential to receive help from its increasing value in the future. This can be especially advantageous in a growing real estate market, where property prices are expected to rise. 

Moreover, owning a home allows you to build equity. As you make mortgage payments, you gradually increase your ownership stake in the property, building equity that can be leveraged later on for other purposes, such as upgrading to a larger home or funding other ventures. 

On the other hand, investing in real estate as your first property can also offer compelling advantages. 

Investing in real estate 

When you choose to invest in a property rather than buying your first home, you open up a world of possibilities. One of the most significant advantages of investing in real estate is the potential for generating passive income. By renting out the property, you can receive a steady stream of rental payments that can supplement your income or serve as an investment for future financial goals. 

Additionally, investing in real estate allows you to diversify your portfolio. Instead of putting all your savings into a single property, you can spread your investments across multiple properties or even different types of real estate, such as residential, commercial, or vacation rentals. This diversification can help mitigate risks and potentially increase your overall returns. 

Furthermore, investing in real estate provides you with the opportunity to take advantage of tax benefits. In many countries, real estate investors can deduct expenses related to their properties, such as mortgage interest, property taxes, and maintenance costs. These deductions can reduce your taxable income and potentially lower your overall tax burden. 

Challenges and Risks of Real Estate Investment

It’s important to note that investing in real estate does come with its own set of challenges and risks. Being a landlord requires active management, including finding tenants, handling maintenance and repairs, and dealing with any potential issues that may arise. It also requires careful financial planning to ensure you have sufficient funds for property management, unexpected expenses, and potential vacancies. 

Ultimately, the decision between buying your first home or making your first investment depends on your individual circumstances, goals, and preferences. Consider factors such as your financial situation, long-term plans, and risk tolerance before deciding. 

The Hybrid Approach: Combining Home Ownership and Investment

In some cases, a hybrid approach may be suitable, where you buy a property that can serve as both your home and an investment. For example, you could consider buying a duplex, live in one unit, and rent out the other. This way, you can benefit from both the stability of homeownership and the potential income from rental property. 

In conclusion, whether you choose to buy your first home or make your first investment in real estate, both options have their merits. Buying a home provides stability, pride of ownership, and potential long-term appreciation, while investing in real estate offers income generation, portfolio diversification, and potential tax benefits. Ultimately, it’s essential to carefully evaluate your personal circumstances and goals to make an informed decision that aligns with your financial aspirations.  

There is more than just one way to buy property. If you’re ready to kick-off your search for your new home, download the Coposit app and start browsing from a range of projects where you can secure your home for as little as $10k upfront.

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