So you’ve growing up, managed to scurry away a small sum every month, and are beginning to wonder about the best way to utilise your saving’s value? Many families live by the dogma of saving for a house and paying it off as soon as possible. Grandparents told it to your parents, and your parents told it to you. But is this really a viable avenue for maximising wealth and financial independence, or is it a tradition that has become less effective with each subsequent generation? It really depends on you and your situation. Allow Swoosh to show you how to decide.
Ready to invest
Any form of financial investment deserves plenty of forethought. The important question to ask is whether you are emotionally and financially ready to make such a commitment. Some good indicators to suggest you are in a stable enough situation to invest are the existence of comprehensive emergency savings, and income (whether passive, direct, or both) that adequately cover the costs to live with excess dedicated towards the investment.
Emergency savings are essential. You may have saved enough money to lay down a deposit for a bank loan, but what about beyond that? An investment can go drastically downhill at any time, and properties often have features than can incur physical damage that need repair, replacement, or simply ongoing fees such as land rates and interest on loan repayments that need to be met. To have your income satisfy your costs of living usually means you have money to spare which could be allocated to this, but if for whatever reason you find yourself short, these savings can be what keep your investment from going under. A good idea is to research common costs that will be involved with your investment (loan repayments, rates, repairs and maintenance etc.) and factor them in to your weekly/monthly costs of living, to ensure you are capable before investing.
Buying a home or an investment
If you come to the conclusion that you are able to invest, the next question you should ask is what type of investment you want to purchase. Are you buying a home for you and your family to settle down in? Snapping up a bargain with the intention to flip? An investment property to be rented out and be treated as a money-earning asset? The best way to operate your investment will always depend on the answer to this question.
First, consider the elements of your life. If your rent is currently lower than what your mortgage repayments would be, it might be viable to rent out your investment property to have someone else essentially paying off your mortgage for you. If you and your partner are planning on growing your family, you may want the peace of mind that comes with securing a roof over your heads, and work towards securing that for your children’s future. If you are handy and know how to minimise the costs of renovation, flipping a house can often be a lucrative money-making strategy when the market permits (and the renovators know what they are doing, of course).
Secondly, the market itself should be another big determinant of your choice. Housing bubbles inflate and pop all the time, with trade-offs for all home owners. Property in an under developed area could be bought at a fraction of the price its worth ten years later, but if the investors simply sell it, they will encounter hefty Capital Gains Tax and lose a chunk of their profits. The reverse is also true; you could purchase your dream home at the height of its value, and a few months later the market could slash its worth to half of what you paid. It’s essential you know what you want before going in.
Help buying your first home
There are definitely smaller factors to consider than what has been discussed here. Does your job require you to travel a lot, thereby leaving your property idle when it could be earning profit? Have you thought about selling costs, such as advertisements and the possible commission from an agency?
It can be extremely overwhelming, and not at all as simple as our earlier generations made it seem. Fortunately, Swoosh Finance has a friendly team offering fast and secure small loans for whenever your situation may require it. Our hassle-free, fixed term loans and schedule repayments will help you bounce back quick when you’re in need to keep your investment dreams alive.