Property Investment vs Buying a Home

Is purchasing your own home the same as buying a rental?

Buying a house for you to live in and buying an investment property are two very different purchases.

 

Your motivation for buying one property over another is very different. One, you listen to your heart and follow your emotions, the other is purely a financial decision. 

 

When you are buying your own home, you have a personal wish list that you want to achieve – or as close as you can. Maybe you want to live in a certain area, with a minimum number of bedrooms and space with all of this coming within budget.

With an investment property, all that matters is finding a property that is in demand that will increase in value over time. So it doesn’t matter what you personally think of the property, it’s about how easy it would be to rent out, how easy it is to maintain and how much it will increase in value over time. So it doesn’t matter if it has 3 bedrooms instead of 4 and there isn’t much of a backyard, because the rental yield looks fantastic, and the value of the property is on the up and up.

 

So make sure that when you are looking at property that you have the right ‘hat’ on. Ask yourself a few questions:

• Is this property purchase about my financial future or is it about my day-to-day life?
• What do I want this property to do for me in the long-term?
• Am I going to live here?

An investment property will take extra work to find. The best ones are usually in popular suburbs, are close to amenities such as transport, schools, restaurants, employment and parks. Which means competition to find these properties will be fierce.

Buying an investment property is quite different from buying your own residence. You need to approach it differently and always keep in mind, it’s not about you, it’s about other people who will be living in it.

What do you do differently when purchasing your own home compared to buying an investment?

Keeping track of finances for your investment property business

What many landlords don’t realise when they buy a rental, is that it is actually a business and requires a lot of time and effort to run effectively. Many people think they can just buy a rental and watch the money roll in but it takes a lot more than that, and one thing you really have to keep track of, if you want to be successful, is your finances.

Managing the  finances for your investment property business shouldn’t be an afterthought. It should be a core part of your strategy. It is important to plan ahead and always have money set aside for unexpected expenses that may pop up. Try forecasting for 6 months and then adjust your plan if necessary.

1. Have a Separate Account

Like all businesses, you should try to keep your personal expenses separate from your business ones. It makes it much easier to organise come tax season. Open another account with your bank, or even a different bank, to ensure your finances are kept entirely separate.

2. Track Expenses

Keep a record of all your expenses relating to your rental. This can include things like: Advertising to find a tenant, repairs, maintenance, rates, insurance and hiring a property manager. You can create a simple spreadsheet for this or use an accounting software. Remember to keep all of your receipts too.

3.  Manage your Income

The best way to collect rent is by automatic payment. The same amount on the same day of the week or month makes it easy to keep track of. You have a digital footprint of every dollar you receive and you know instantly if a payment is late.  When you are in business, you are there to make money and owning rental properties is no different. You need to know exactly what income you have received.

4. Hire an Accountant

While you may be able to handle your finances yourself, is it always a good idea to get an accountant to look over things too. They can deal with the taxes and deducible expenses. You may be able to claim things you never even thought of. Hiring an accountant is a good idea if you have multiple income streams.

How have you organised the finances for your investment property business? What else can you add to this list?

Is buying a home and buying an investment property the same?

No, buying a house for you and buying an investment property are two different purchases.

You may be buying property in both cases, but the motivation for doing so are quite different. One, you a buying with your heart and the other you are buying with the calculator.

When you are buying your own home, you have a personal wish list that you want to achieve – or as close as you can. Maybe you want to live in a certain area, with a minimum number of bedrooms and space with all of this coming within budget.

With an investment property, all that matters is finding a property that is in demand that will increase in value overtime. So it doesn’t matter what you personally think of the property, it’s about how easy it would be to rent out, how easy it is to maintain and how much it will increase in value over time. So who cares if it’s got 3 bedrooms instead of 4 and there isn’t much of a backyard, because the rental yield looks fantastic, and the value of the property is on the up and up.

So make sure that when you are looking at property that you have the right ‘hat’ on. Ask yourself a few questions:

• Is this property purchase about my financial future or is it about my day-to-day life?
• What do I want this property to do for me in the long-term?
• Am I going to live here?

An investment property will take extra work to find. The best ones are usually in popular suburbs, are close to amenities such as transport, schools, restaurants, employment and parks. Which means competition to find these properties will be fierce. So making sure you have a reliable team on your side helping with those purchases will do two things: 

1 Allow you to pounce on the deals as fast as possible. 

2 Keep your heart out of it, and make sure it comes down to the numbers only.

So no, buying an investment property is quite different than buying your own residence. You need to approach it differently and always keep in mind, it’s not about you, it’s about other people who will be living in it.