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Can your first home be an investment property?

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Housing affordability is a big topic floating around in some circles - particularly if you're a millennial trying to break into the market1.

When you've put together enough savings for a home loan, your next step is going to be deciding what kind of real estate to buy. Even though the age-old dream of living in your own home is still alive and kicking for many, a lot of savvy buyers are taking out their first ever mortgage to buy an investment property.

But how does this work?

Regarding the rentvestor

Research from early 2016 showed that in Sydney, asking prices for homes were in excess of $1.1 million2. And across all capital cities, asking prices had gone up over the previous 12 months. The message is clear - real estate is getting less and less affordable, even if lenders are still offering significantly low-interest rates.

Could young people emerge as the rentvestor generation?

What many people decide when conducting their home loan calculations is to purchase real estate outside capital cities, where housing can be more affordable. From there, they might rent in their preferred location. Colloquially dubbed 'rentvestors', this group has emerged in popularity over the last few years3.

What are the benefits?

To start with, purchasing an investment property may mean you have the potential for positive cash flow, which could potentially pay the mortgage for you, while the real estate (ideally) grows in value. Considering the vast majority of the regional real estate in Victoria, NSW and Queensland sells at a profit4, this could be a useful move for first home buyers looking at alternatives to owner-occupation.

First home buyers could get the best of both worlds.

On top of this, first home buyers could get the best of both worlds: home ownership and the ability to live where they really want to. The most desired central city locations might often be the most expensive, so this offers a way in without sacrificing climbing the property ladder.

How do you make it work?

Rental growth can at times be slow, which could mean some might struggle to get a profitable investment property in terms of rental income. On top of this, capital growth may not be a certainty, depending on where you buy. You might want to contemplate seeking some professional advice before making any major decisions.

Property investment can be a tricky prospect, no matter which way you look at it. However, with the help of an IMB Bank Home Loan Specialist, it could be made a bit easier. With a wide selection of home loans for investors and owner occupiers alike, the team at IMB is able to cater to your specific needs. Get in touch to find out what we can do for you.

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2 SQM Research

3 LJ Hooker

4 CoreLogic

Why choose IMB Bank?

Established in 1880, IMB has been helping people achieve their financial goals for 139 years. IMB offers a full range of banking solutions including home and personal lending, savings and transaction accounts, term deposits, business banking, financial planning and can arrange a wide range of insurance and travel products.

IMB has a growing branch network throughout the Illawarra, Sydney, NSW South Coast, the ACT and Melbourne. We have a lending specialist in every branch and a team of mobile lending specialists who will come to you. IMB members enjoy access to free automated phone and internet banking and a team of professionals who are just a phone call away at our locally based call centre.

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