It's never too early to start thinking about your future. As a young adult in Australia, you are among the generation where 72 per cent of 18 to 29 year olds think it is important to buy a house as soon as you can. This is according to findings revealed in BDO and the Co-Op's Future Leaders Index.
There are of course many hurdles to cross in order to buy a house. However, there are also many benefits that a property can bring to your future. So why not consider an investment property instead of becoming an owner-occupier?
Here are seven reasons why you should invest in a property while young:
1. You can save money while living at home
If you still live at home and aren't ready to move out yet, an investment property will bring you extra income while you only have to pay minimal living costs, depending on your family situation.
Board is usually cheaper than rent and typically only for family or close friends. The Australian Taxation Office considers board or lodging costs a domestic arrangement because it does not fit the specifications of a rental income, and so income tax deductions for board cannot be claimed.
With a higher income set against your expenses, you can save up for other things that may be more useful for you in your current situation. This can include a car, paying off your student loan or even saving for furnishings for your future first home.
Of course, living at home is cheaper than renting. But if you're out of the family nest, then depending on what you've invested in, use that income to pay off your own rent so that you can put the money from other income streams towards other assets.
2. It doesn't have to be your dream home
Investing in a property while you are still young means you don't necessary have to find a house that will be your first home. This way, you can take advantage of a property that has a desirable current market value and focus on its long-term monetary benefits. While you earn income from regular rental payments, you can save up for your ideal house.
It'll give you time to learn the ropes surrounding managing a property and a home loan, and you'll also be more flexible about what you invest in as you won't have to meet certain requirements that an owner-occupier has.
You won't have to worry so much about finding specific features such as location, amount of bedrooms and garden as it could be someone else's dream home. This opens up many more property opportunities for you when finding a place to start investing.
Another option is to become an owner-occupier but to rent out some of the rooms of your property. The Australian Government offers a First Home Owner grant to help new buyers obtain a mortgage. To be eligible for this grant, you must live in the property you purchase for a set amount of time, but you can also rent out additional unused rooms for extra income.
The criteria for this grant differs for each state, so make know the regulations first.
3. You can earn money while studying
A property is also less time-consuming than a full-time job. You can earn money while studying, which is of course, every student's aspiration.
Devoting time to maintain your rental property is crucial, of course, but if you do your research beforehand and invest in an appropriate property for you, then it should see you into the foreseeable future.
Finding a suitable investment property before you leave your studies will also free up more time for you to focus on your career once you join the rat race. You can focus on a full-time job, or looking for one, whilst knowing you've got a steady stream of income from somewhere else.
4. It'll help with your long-term goals
Finding an investment property while you're young also means you can take advantage of prime real estate with your long-term goals in mind. Start early and scope out properties in ideal areas you'd like to live in for the future.
Somewhere near schools and shops are great as you'll have no problem finding tenants, and when you're ready to start a family or settle down, you can always claim the property back and become an owner-occupier. Think about the sort of school you'd like to send your kids to, or an area that has good job opportunities.
Considering your long-term goals will mean that choosing the right property to invest in is more restrained, but it could pay off if you know what you want for your future.
The options are endless - if you're not wanting to settle down in that property then just continue it as a rental, or sell it off when the market is right and invest in something bigger and better.
5. You can learn from others' mistakes
There will always be others in the property scene that have been there longer. Starting out younger means that there'll be copious amounts of experienced property investors with invaluable advice. This will help you from repeating the mistakes they've made, and you can pick up faster by following the steps of their successes. As you're young, you'll have time to learn from your own mistakes should you make any.
A big part of purchasing a property is having a good knowledge about mortgages. There are plenty of options out there so take advantage of online resources, like a mortgage calculator, and if in doubt, ask questions. There'll be plenty of experts that can provide you with the necessary knowledge about your first home loan.
6. You'll learn good saving habits
You can establish good saving habits from a younger age. This will prove to be invaluable experience, especially when you consider higher-budget long-term goals in mind.
It'll also give you experience surrounding managing a house and a mortgage. The Australian Bureau of Statistics has found that the mortgage market in Australia has grown significantly over the last year. This includes loans for both owner-occupiers and investment owners.
In a March 2014 article, the Global Property Guide talks about a housing shortage, due to smaller household sizes, a growing Australian population and rising immigration rates. Don't wait to start considering a property, or it could be much more difficult. Start now and get some property investments under your belt earlier rather than later.
7. It'll help you establish a good credit history
By getting a home loan for your investment property while young, you'll be able to establish a good credit rating. Keeping on top of your mortgage repayments will be easier as you don't have to juggle other big finance decisions as well, such as expensive cars, hire purchases, and also, your student loan will be quite recent.
It'll also benefit you when considering other properties in the future as you'll have a history of good credit, and can help you obtain better home loan deals.
Buying an investment property in your 20s
Roy Morgan Research has revealed that there has been a 37 per cent increase investment mortgages. This is from the four years prior to 2014, among Australians aged 18 and older. It is also significant to note that during this period, the amount of owner-occupied loans only rose a mere 4 per cent.
Roy Morgan also states that in the groups of 35 year olds or younger, there was a decrease in the proportion with an owner-occupied loan.
These trends reveal that now is the time. With the median rent rising in states such as New South Wales and Victoria over the last year, according to CoreLogic, start considering channelling your savings into an investment property while you're still young.
Don't let your age or lack of experience stop you from getting your foot onto the property ladder. Your future self will thank you!
Image credit: Du Truong
Home for sale image added on the tablet