At some point in almost every adults life they consider purchasing a home. The idea of owning where you live & investing rather than throwing money away towards rent is extremely appealing. What many would-be buyers don’t consider however, is making their first home an investment property. Let us explain why you may want to consider it.
5 Reasons your first home should be an investment property.
Purchasing your first home allows you many unique advantages when it comes to stepping into the world of real estate. Generally speaking, you have access to special buying opportunities, unique freedoms, and buying flexibility; below are a few other key advantages:
1) Grants and a low down payment
When buying an investment property, banks typically want to see a downpayment of 20-25% towards the purchase. This isn’t true for a personal property however. Lenders generally only require a downpayment as low as 3% for a property in which you intend to live. On top of this low downpayment, many banks often have first-time home buyer grants that can drastically lower your downpayment or even bring it to zero! That means, if you are purchasing a duplex you could immediately gain revenue streams with no money our of your pocket!
2) Make your roommates tenants
Often times in their 20s-30s individuals find themselves in a shared living situation. Whether they are making their way through college or simply entering the workforce for the first time it’s just easier to have a roommate. By making the savvy financial move to purchase a home early you can turn your roommates into your first tenants, effectively getting rid of your rent payments and removing yourself from the rent trap.
3) Build equity
The first places we live are often surrounding colleges, close to our entry jobs, or in metropolitan areas. Coincidentally these are the fastest growing areas in real estate! In Louisville, Kentucky (where we are located) we have seen historic appreciation in downtown areas in upwards of 5% year after year… this means that by purchasing a property in one of these areas and living there for a few years you are likely to see massive appreciation and accrued equity in a short period of time. If you were to purchase a home at the beginning of your college career, maintaining it and making minor improvements along the way by the time you finish college you may see an increase of 20% in value! If you have taken advantage of grants- a low down payment – and making your roommates your tenants then we are talking huge profits.
4) Future income streams
Everyone would love a little passive income, and can you imagine having a home fully paid off property that you could sell in the future as retirement? Well, by making your first home an investment you can do just that. Let’s say your first home purchase was a duplex- you live in one side and rent out the other. When you are ready to move you can simply take advantage of the ——brrr strategy—— keep your investment and rent out both sides! Not only are you gaining additional income streams in the short term while still getting out your equity, but in 15-30 years (depending on your mortgage) you are setting yourself up to have a fully paid off investment property!
5) A Head start
By getting started in investing early you are setting yourself up to make future investments at a much earlier age than your peers. Accruing significant cash reserves to make future moves is extremely difficult and everyone knows money is magnetic-meaning the more you have the easier it is to get more. By making your investing moves early on you are allowing you self the financial freedom to make decisions in the future and further diversify your investing portfolio
We hope that this short article has opened your eyes to the many advantages of turning your first home into an investment property. If you are ready to make your first steps into the investing world feel free to drop us a line or take a look at our current inventory. We are always here to help. For further information be sure to check out our other investing blogs where we periodically post need-to-know articles for every investor. Good luck on your future ventures from the team at 2nd Wind!