“Investment Property” implies that you invest in a property that you are going to live in, and hope that while you stay there and the price of the land will rise enough to cover the mortgage that you took out to initially buy the property.
If the property appreciates sufficiently while you stay, you will make money on top of the mortgage and this is your end profit.
This is also an investment suitable for those who don’t want to rent a property. When you rent for a long time, you might feel like you are wasting money by giving it to your landlord. If you buy the property, this money you would have spent on rent is instead going to be spent on the mortgage repayments. When you are ready to move from the house, you have the opportunity to make money on top of any costs of the mortgage.
But remember a few tips:
- This is a much harder game if you don’t have upfront cash to buy the property or subsidize the loan – because the mortgage repayments are going to eat into your investment earnings.
- It also requires a better understanding of the real estate market trends that you are in; as you must find a property that will appreciate reasonably quickly.
- This investment tactic tends to take longer – in that you may need to wait for many years before the property appreciates enough to be worth selling again.
- It also requires economic stability during that period, increasing the risk.
- But, if you choose the right property, in an area appreciating fast, this type of investment strategy can work. And meanwhile you always have a place to live.
Here’s what to look for when searching for a live-in investment property:
- Property and land tends to appreciate naturally as other things develop around it; so when you look for an investment property to live in, try to choose upcoming areas. Places where maybe the level of infrastructure is currently lower – but clearly rising quickly.
- Don’t buy in areas which are already fully developed, unless you get a very competitive price when you buy the property. The appreciation in these areas is likely to be slower.
- Look to see where other people are choosing for investment and speak with real estate agents. Always research the market before buying a live-in investment property.
- A note regarding Land Investment: If you want to simply invest in land – you must invest at or below market value. If you spend too much on a land investment, your risk that it won’t increase in value is high; and meanwhile, you get no benefit from the property whatsoever because you can’t live on pure land.