Buying an investment property closer to your home is due to your impulse buying behavior. Let’s learn about the reasons behind it.
So you have bought your first home and one day a bright idea comes to your mind to buy an investment property. You look around and another bright idea comes to buy something closer to where you currently live. There are various reasons to buy investment property closer to your home: –
- You are familiar with your surrounding area.
- You are lazy to research for better areas to invest in.
- You don’t have time(or pretend to not have time) to research for better areas to invest in.
- You want to buy something where you can go and have a look every day or maybe once a month.
- You feel more secure and comfortable seeing something closer to your eyes.
In case you are still not thinking about investment property, the article “Why Are We So Afraid To Make High Impact Property Investments?” is worth reading for deeper insights.
Hence you do one of the following: –
- You buy an apartment, townhouse, or villa closer to your home and rent it out.
- You buy a house closer to your home and you rent it out.
- You buy land closer to your home and you plan to build a house on it in the near or long-term timeframe.
Questions you need to ask yourself: –
- In case the projected capital growth does not happen to the house/townhouse/villa/apartment for the next 5 to 10 years (say it does not increase by even 50K), will you be still happy?
- In case the interest rates rise (or keep rising), will the rental from the above property be enough to pay the expense (mortgage interest) on the property? How much will you be putting from your own pocket and how many months/years you can put this difference between rent and interest rate? Say for example every month you have to put in 1000 AUD to cover the less rental and more interest rate, how many months can you survive doing that? Although if you are financially savvy it can help you to a certain level. If interested to know about becoming financially savvy you can go to “4 Steps For Becoming Financially Savvy”.
- In case your family situation changes(job loss, job change, health loss, death), will you be able to cope with the financial pressure?
To conclude before signing the contract for your investment property, ask yourself this question:-
- After buying this investment property, if I lose my job or become permanently disabled or bedridden, will this property rental (cashflow) pay for its own expenses(mortgage interest, property maintenance)?
- After buying this investment property, if I lose my job or become permanently disabled or bedridden, can I sell this investment property and get some capital gain to survive for a few months/years?
- Should you spend some more time doing research, looking for a better investment property rather than buying closer to home? Hence say you buy closer to home, you can see it every day, but neither it has capital gains nor cash flow over the period of 5 to 10 years, then ask yourself what the use is of buying such closer-to-home property.
Further Reading Suggestions based on your interests.
- Is It Worth Buying Your Future Retirement Home Now?
- The Difference Between Middle Class, Rich, and Poor
Disclaimer: Articles in this blog are just the author’s or authors’ personal opinions.
It may or may not be correct. Please do your own due diligence and seek professional advice according to your own personal circumstances. The author or authors cannot be held responsible/liable for any content in this blog.
