Prior to buying a home for yourself, it may sometimes make more sense to acquire an investment property. Purchasing an investment property before buying a primary residence may seem unusual, but for many astute real estate investors, it makes sense. Let’s examine some of the factors that influence many investors to buy rental property and extend their rental term.
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Living in an expensive city might make buying a home impossible. Ownership becomes more and more out of reach as costs rise, despite their growing down payment savings account. It can make more sense for purchasers in these regions to acquire an investment property in a cheaper neighborhood. Instead of waiting until they have saved enough money to match the market values in the city where they live, it enables them to get into the real estate market right away.
The money you pay to replace the furnace in your own house is merely a necessary cost, like buying food or hockey tickets. The IRS considers the cost of the furnace at your rental property to be a business expense. As a result, you could get part of the money back when tax time rolls around. An investment property comes with a lot of different tax breaks, turning costs you’d incur for your own house into tax breaks for your rental property.
You may fully benefit from the time worth of money by investing first and buying a property later. A dollar invested now will increase in value over time, surpassing a dollar invested in 10 years. When you purchase your first investment property today, the rent that is collected serves as your first salary. Put that money to work for you so it can start increasing right away.
Instead of saving up to buy your own house, consider making an investment in a rental property today to get a head start on the appreciation. Even as their funds increase, the individual in that pricey location is seeing appreciation making it harder and harder to acquire a property. The increasing-value asset is yours. Additionally, a rising rent price raises your revenue overall.
Assets vs. Liabilities
Assets include investment properties. You may sell it if you need cash, and it generates income for you. In many respects, a private residence is a responsibility. To generate money, the former is owned and rented out; many of the accompanying costs are tax deductible. This is why, even if it means continuing to pay rent, it frequently makes sense to buy an investment property and put off buying your own house.
You are bound to one place if you own a home. You can always sell your home and relocate, but if there is a downturn in the housing market, you could have to do so at an awkward moment. Renters only need to pack their belongings, give the landlord the keys, and go. This makes accepting that amazing job offer in a different state or country simpler.
Buying a home for someone else to live in before buying a place for yourself might seem contradictory to many people. In many situations, though, it makes more sense financially, taxably, and practically to reverse the usual sequence of real estate acquisition and start out as a landlord.