Should I Keep My Home As An Investment?

Published by Otto Dargan on February 5, 2019

Guest post: George Porter

What should you do with your first home when you decide to upgrade and buy a new home?

Understanding the benefits and identifying the common mistakes can help you make a better decision when choosing to either keep your home or sell it.

4 reasons to keep your first home as an investment

Your first home can be a valuable asset without having to sell it depending on the nature of the property and the location.

It can be an easy source of income

Your first home can become a source of passive income that you can get started with quickly and enjoy for years to come.

You’re likely to profit

Compared to other types of investments including shares and managed funds, property prices are projected to increase over the long-term.

This is the despite a glut of off the plan developments in our major cities, particularly on the east coast.

Many of these projects are starting to slowdown and lending policies have remained tight for the last couple of years.

Meanwhile, there is still a struggle with the supply of standard residential homes (not apartments) to meet demand in Australia.

This is despite the strong market downturn.

Ongoing tax benefits

Negative gearing allows you to reduce your taxable income if owning your home costs more than what you earn from rental income.

These costs include interest payments on your home loan and costs to maintain and repair the property.

Similarly, if you eventually sell the property and make a loss, you can claim a capital gains loss.

It’s essential that you speak to a qualified accountant who has experience in maximising property investment tax benefits.

In this way, you can ensure you play by the rules set out by the Australian Taxation Office (ATO).

Avoid CGT completely

If you decide to sell your property for a profit instead of renting it out, you can actually claim a capital gains tax (CGT) exemption.

Contrast this to other investments where you are typically required to pay tax on your return on investment (ROI).

A path to being positively-geared

While you rent your first home out, the money that comes in can be used to pay off the mortgage on your new investment.

Of course, becoming positively-geared can be a long road.

When you should not keep your home as an investment

All investments have risks, and it’s important to understand this.

Keeping your home as an investment property is not a get rich quick scheme so this strategy is not for everyone.

Similarly, you could put yourself into financial hardship if you’re already having trouble managing your mortgage repayments and other bills, or if you already have a high level of debt.

To combat speculative investing or making a poor financial decision, it’s important to seek financial advice to ensure you’re in a position to ride the inevitable waves.

For help with getting approved for an investment loan or selling your home and buying a new one, please call us on 1300 889 743 or complete our free assessment form.

Our mortgage brokers are highly-experienced and can have a real discussion about your future plans and the most beneficial way forward.