For many of us, buying a house is one of the last things on our minds as we navigate the world of young adulthood and focus on starting a career and living independently.
But as any successful property investor will tell you, it’s never too early to start building your property portfolio and working towards the leverage you need to buy your dream home.
Here’s just a handful of reasons why buying an investment property at a young age can be a ticket to success.
Build equity to use for a home deposit
With property prices at an all-time high – especially in big cities like Sydney and Melbourne – first homebuyers are finding it increasingly difficult to save enough for a 20% home deposit and reduce their total home loan amount.
By buying an investment property in a more affordable area with a reliable supply of tenants, you can start building up the equity needed to finance your first live-in home. After five years or even less, the equity from your investment property could fund a sizeable deposit on a more expensive property – giving you more choice when deciding where to live.
Take advantage of tax benefits
Buying an investment property has some potential major tax advantages that can significantly (and legitimately) reduce your tax bill every year.
Many of the costs involved with owning an investment property (such as advertising for tenants, fees paid on your loan, maintenance and so on) may be tax deductible, and you can also claim depreciation on the property if it loses value during the financial year.
Likewise, you can potentially use the losses arising from negative gearing (where the rental income you make from the property is less than the expenses) as a tax deduction.
Establish your portfolio while you have fewer financial responsibilities
As you grow older, you’re likely to take on more financial responsibilities: think childcare, car payments, insurance – the list goes on. Once those additional costs start rolling in, you may not have the cash or freedom to take advantage of property investment opportunities.
With that in mind, it’s a good idea to put your money to work and start building your nest egg through real estate while you’re working and have access to a healthy disposable income.
Start learning the market earlier
Successful real estate investment requires knowledge and experience – but we all have to start somewhere. By getting on the property investment ladder at an early age, you’ll have more time to learn about all the important factors that impact the property market, and how to use them to your advantage.
Even if you have no idea about how to invest in property now, talking to a trusted property agent or financial advisor can give you a head start, so you can start developing an investment strategy that fits your goals and budget.
Take advantage of full property cycles
Property cycles typically last between seven and 10 years, and during that time, you can expect to see peaks and troughs in property values. By investing in property at a younger age, you have time on your side and can comfortably ride out lows in the market.
Property investment is typically a long-term game, and the more time you have to wait out the natural cycle of the market, the better position you’ll be in to sell at an opportune time.
Enjoy a second income stream
If you’re purchasing an investment property and renting it out in an area with high rental yields, it’s likely you’ll start making a profit off your investment as soon as you find tenants. With this additional income stream, you can pay off other debts and bills, or put the money towards expanding your property portfolio.