I am renting at the moment and I've saved $15,000 for a deposit for an apartment. With the little knowledge I have, it seems better to buy an investment property so I rent that one out and can claim depreciation and expenses to pay less tax - while still renting where I am. This has the added benefit of being free to move around as I may change locations for work etc.
Though to me it makes sense, I don't hear many people doing it. Is this strategy common and/or viable? Or am I forgetting an obvious flaw? Perhaps I am overestimating the benefit of paying less tax and underestimating the costs of having a rental property (both financial and time-wise)? If it is relevant, I only earn $50,000 a year so I don't pay a hell of a lot of tax. Or are there some rules of thumb to go by? For example, it seems to me that one can make this work if one is prepared to live in a fairly cheap place, and buy an investment property where the rent is higher than where you live.
I tried to google this idea and didnt find much. I did find this webpage with a video of a guy stating pretty much exactly my plan:
http://www.yourinvestmentpropertymag.com.au/expert-advice/sa…
He mentions something regarding 6 years to sell the investment property? Not sure what he means. Any thoughts, ideas and suggestions are greatly appreciated.
Your logic is correct.
I was lucky enough to sponge of my parents and buy an investment property when I was younger.
It's great as all the borrowing costs were tax deductable and in no time at all, it was positive geared.
With real estate a lot is luck, so I wish you luck, may your investment grow at a rapid rate.