Investment Property vs Your Home: Which Should You Buy First?

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Should you buy an investment property or your own home first? This is a major life decision and should NOT be taken lightly. In this episode I give some insights to hopefully make this decision easier for you.

Resources Related To This Episode

2 Properties To Financial Freedom

Transcription:

Tonight I want to talk about the idea of whether or not you should buy an investment property or whether or not you should buy your home first and now this is not a decision that I think you should take lightly. Obviously this is a really important decision for you and for your family. This is going to be a massive purchase and a lot of people want to own their own home, so I’ll just go straight out there and say that there’s no right answer to this, so I’m not going to be saying what you should or shouldn’t do, but I’m going to look at some of the pros and cons of each decision and then you can hopefully I’ll help you make that decision for yourself because this is a big one. A lot of people want to own their own home. A lot of people also want to invest in property and achieve financial freedom, so what’s going to be best for you and what are some things that you can look at?

One of the things I think people don’t realize when they’re making this decision is that they often choosing between the idea of security and having that security because having a dream home or having a home that is your own that you pay off and own outright, that provides people with a lot of emotional security. No one’s going to kick you out of that home. Banks can’t foreclose on you once you own it outright. If you’re renting than the people who are in the home can’t kick you out. That home is yours. You’ve got security for yourself, but especially being. If you’re like me, where you’re married with kids, you’ve got that security that you’ve got a place to raise your family, that you’re always gonna. Have a roof over your heads. So choosing between the security and the potential of freedom and so freedom is the ability.

Well, I believe to do what you want with your time. And for me, freedom has always been way more important than security. So I’m not saying that freedom should be more important than security for you, but I will let you know that it has always been more important for security for me. And my wife had basically saved up a house deposit ourselves, but we were unhappy where we’re living on the gold coast. So we were looking at purchasing property at the time. Actually we’ve done this twice. We saved up a deposit, we paid off debt and we were basically one commission away from having our deposit ready to buy a house on the central coast and we gave all of that up in order to move up to the gold coast. So we chose freedom in which shows that we wanted to move up to the Gold Coast to get a lifestyle and so I could start my business.

And so we gave up the house deposit, use that savings for the move and to support us while we got my business up and running. So we chose freedom then and then we were on the gold coast. We were in a financial position where we could purchase a house or would be able to purchase a house in the near future, had the deposit, but we weren’t happy on the Gold Coast. Um, we decided that we wanted to try something radical, something different, and so we purchased a sprinter van and then did that up and went traveling as a family in the van. So again, we put our savings into that and chose freedom over security because the security wasn’t making us happy and we weren’t happy in that. And so we thought, you know what, we could double down on the Gold Coast, we could purchase the house like most people do.

We could choose security, but we’re not happy right now. And so let’s choose freedom. Let’s find the place that we’re happy. And then if we want to settle down then we’ll do that in the future. So we made that decision, we made that gamble and that ended up bringing us up here to Noosa in Queensland. We absolutely love it here. We found a Montessori School for the kids. They love it. We feel really settled here. And so we chose freedom many times. I’m not saying that you should, but a lot of people just don’t realize that often they’re making that decision whether they’re going to choose freedom and financial freedom or potential financial freedom if they invest well or security in owning your own home because owning your own home doesn’t give you financial freedom if you own your home and let’s take it to the nth degree.

So let’s take it 25 years down the track when we paid off all our debts and everything. If you own your own home and you pay off all your debts, then okay, you’re not paying rent, you’re not paying a mortgage anymore, but you still have council rates. You still have a few fees associated with that house, like maintenance, water, electricity, all that sort of stuff. So you still need to find an income in order to pay for that sort of stuff. So owning it outright will save you some money so you don’t have to pay rent or pay a mortgage, but you’re not financially free. You still need to find income from somewhere else. On the other hand, if you invest in property, let’s say down the track, 25 years down the track, if you do something similar to what me and Ben talked about in the two properties to financial freedom, where you purchase those properties, they’re positive cashflow.

They’re paying themselves off, you pay them off over maybe 25 years or less. Those properties are then generating you an income where you can now use that income to pay rent or to pay a mortgage or to pay for your food, to pay for your electricity, to pay for your fund, to pay for a van, whatever it may be. So investing in property can deliver you that income that can create financial freedom. Whereas investing in a house, if that’s all you do, then you’re not going to end up financially free. So often people don’t realize that they are making decision between security and freedom, and so that’s something that I just want to make you aware of. Also, I think a really good question to ask is, let’s say you were financially free. Would your dream home still be your dream home? So a lot of people, how do I say this?

You can do both, you can definitely do both, but what it’s going to cost you is time. So if you invest in your house first, then you’re investing time into that and you’re gonna have more time having that house and having that security. If you invest in property first with the focus on financial freedom, let’s say you invest well, um, you’re not going to have that house and that security, but you’re likely going to achieve financial freedom faster. And so you can then experience that freedom earlier than if you had a bought your own home. Now there’s so many factors that go into this. A home can definitely help you leverage into investment properties and so it can allow you to do that. So there’s so many different variances that can affect this situation. Um, but just think about that idea of time. You can do both, but what would you prefer to do and what’s more important to you.

And then also if you were financially free. So let’s say you took the property route, you invested in investment properties with the goal of getting financially free as quickly as possible, focused on getting to that financial freedom point and then thought about your home. Let’s say you achieve financial freedom. You can now live anywhere you want, not just in Australia but potentially in the world. Assuming you get the visas and all that sort of stuff. Is your dream home or what you think your dream home is now, is it still going to be your dream home? And I talked about this in a previous video. Remind dream home used to be a house in Sydney in Granola, which is a beach side suburb would probably cost around $4,000,000 or something like that. But since being financially free, being able to live anywhere, we decided to relocate.

We ended up up here in Noosa and so my dream home, what it would have been maybe six or eight years ago, is so different to what it would be today. Where I live today and my dream home in six or eight or 10 years time might be different to what I think it is today. So just because it’s your dream home today doesn’t mean it will be in the future. So try and think about if you achieve financial freedom, if you can live anywhere and you don’t need to worry about earning an income, would you still live where you live and would you still live in the house that you live in? There’s a great saying that I absolutely love, which is you can have anything you want but you can’t have everything you want and that’s something else to think about as well with the dream home, with how luxurious you want it to be.

How expensive do you want to do radio and what city do you want it to be in? You can have anything that you want but you can’t have everything you want. And so for me, I wouldn’t choose a much more modest dream home in order to have a better lifestyle and to live in the location that I want to live versus a more expensive, maybe more luxurious dream hung, um, but then sacrificing on needing to work more or work on things that I don’t want to work on or live in a place that I don’t necessarily want to live. So there’s always trade offs. And so you need to think about those. It’s also good to think about can your investment properties actually purchased your Dream Home for you? So rather than saying, okay, should I purchase my dream home or should I purchase investment properties?

Or let’s say you want to do both. What if you invested in property and that property was then able to buy your dream home or maybe even by your better dream home than you ever thought possible. So those properties might spin off extra cashflow that allow you to purchase your dream home. Or maybe you sell some of those in the future in order to get enough cash in order to purchase your dream home. So there is the potential that the investment properties down the track could purchase your dream home and the flip side of that is also true that by investing in your home, you could leverage the equity in that home if the property goes up in value in order to get into investment properties and to grow your portfolio faster than you would have been able to if you have just purchase investment properties.

I know a lot of people like to purchase their own home in order to renovate it and to do it up while they live there and so they take the time, they purchase it and then they’re doing it as they’re living there because it’s giving them emotional benefit by doing that up. But it’s also adding value to the property at the same time. And that’s something that you might not be driven to do when you have an investment property. We always like to think about these things super. Logically, I’m, I’m starting to realize how much of an emotional person I really am and how much of my decisions are based off emotion. And I definitely don’t think that’s a bad thing. Ultimately it comes to investing because we’re talking about numbers because we’re talking about finances. We decided to take the logical route, but we don’t actually think about our emotions as a huge driving force in our lives and something like owning your own home can be a huge driving force to actually making that property better.

So investing in that property, making that property more valuable by doing the bathroom or the kitchen or painting the property. Whereas if you just purchase a rental property, someone else’s living in it, do you really care about doing up adding that value in getting that equity faster? Probably not. Are you really going to do the legwork to paint that property yourself? A lot of people won’t be, but when you’re living in a property and the problems are staring at you every single day hopefully is. This is what happens from my wife, the problem stare at her every single day. She’s very spatially aware and so she wants to go and fix it because she’s in it. So our notions drive us to improve the properties that were living in, even though we’re only renting at the moment, so even though we’re renting, we spend money to improve the property and make it as good as possible for us, but as well as good as possible for our landlords so it helps them, but think about your emotions and think about what’s going to help you and what’s going to push you forward, what’s going to keep you motivated.

A lot of people purchase their own home and then get motivated to pay off that home as well. Sometimes that motivation is a good thing. Sometimes it’s a bad thing because all they focus on is working in a job that they hate and paying off their home and when their homes paid off, they still have to work in a job that they hate. So ideally the motivation would be to invest in property and create that financial freedom for yourself. So you can pay off your home, but it doesn’t necessarily always work that way. So what you do is up to you really at the end of the day, what’s more important to you? For some people it’s more important that they have that own home. That’s one of the dreams that something that they’ve always wanted. Since our child maybe they didn’t have that security and all of that sort of stuff.

Some people want that and if that’s important to you, then more power to you. Some people want financial freedom and they want the ability to do what they want with their time and they’re happy to allow the home to wait and they’re happy to deal with the difficulties that come with renting, with not necessarily having a house the way you want it potentially getting kicked out and having to move to another property is the owners changed their mind. There’s a lot of issues with renting. It’s not just always glorious and you can just live in whatever house you want to live in and do whatever you want. There’s restrictions on what you can do. So are you willing to put up with that because you care more about financial freedom. So really, I guess a better question to ask is what are you more willing to suffer for?

So if you want financial freedom, then you’re willing to suffer through not having the dream home and not being able to do what you want, but you know down the track you’re going to have financial freedom, hopefully eventually that will pay for your home, so you’ll end up with both, but you’re willing to suffer through that before you get it. Whereas maybe you want to, you’re more happy to suffer through work that you don’t like or having to pay down the home loan and not having that financial freedom as quickly, but having the security of your home is more important to you and you’re more happy to suffer in order to accomplish that and achieve that and focus on financial freedom down the track. So sure, logically, I’m sure that there’s a perfect decision to make and that by investing in property and and building up financial freedom through that might make more logical sense.

Really, it’s up to you. You’ve got to balance the emotions. You’ve got to balance the logic. You’ve got to balance the finances, think about what is more important to you, what you want more, and also ask yourself, if I was financially free, would this still be my dream home? And if the answer’s no, well then maybe you should get financial freedom first and then when you’re financially free, then you can work out, okay, what do I actually want to do with my life? How do I actually want to live? And then you can purchase your dream home because you would have changed anyway so you can live in what you want to live in now and you can really enjoy that for this time in your life. And then once you are financially free and your needs change and your desires change, then you can purchase your dream home or you can rent it.

It doesn’t even matter. So yeah, what you do is up to you. I wish you the absolute best in it and until next time, stay positive. If you like today’s video, then go ahead and subscribe to the channel as we have a new property episodes coming out multiple times a week, and also why not check out this video that I did with Ben Everingham on how you can become financially free through just two investment properties, so financial freedom sounds like the track you want to take. Definitely check that out as that is a life changing episode and I’ll leave the links to it in the description down below as well.