At What Age Should You Invest in Property?

Many young adults wonder when the right time is to take the step of becoming a property owner.  After all, your property usually is one of your most valuable assets – so it’s not a decision to be taken lightly.

There are pros and cons to buying vs. renting a property – but the main difference is that property ownership usually costs more than renting – at least in the early stages of ownership.

The reality is that, over time, when you buy property your debt reduces and in many cases your bond installment is actually less than the equivalent rent you would pay in years to come.  Instead of paying off someone else’s investment, you are actually paying off a debt on your own asset that, over time, grows in value.

So if you can afford to, the sooner you can invest in property the better.  As with all investments, it’s often about timing.  Assuming your timing is right and you have the means to afford the commitment, property ownership should be seriously considered.

What often deters younger investors from taking the plunge is the “C-word” – Commitment.  Unlike a rental, where you can easily move on at the end of your lease, ownership is more permanent.  Sure, you can sell your property, but that will incur costs.  So you need to view property as a medium to long-term investment.

Before you make the commitment, you need to be sure you can afford to.  As a general rule, banks will allow you to borrow up to 30% of your monthly income.  They will qualify you on your affordability and factor in potential interest rate increases.  In doing this, they are making sure that you would cope with any rate increases and not be in a position where you default on your installment.

Also important to consider is your job stability.  The banks will need to be sure you have stable employment and a regular income.  It’s also important for you to consider this.  With a significant monthly debt to service, you will need to be quite sure that, should you change employment, you are going to receive a stable income.  If not, you may find yourself in the position that you struggle to make your monthly repayments.

Also important to consider are the other costs of property ownership.  Rates and taxes, levies, maintenance, insurance – these and other costs need to be budgeted for.  There will be other sacrifices you need to make in order to cover these additional monthly expenses.  For many adults, the thought of making sacrifices isn’t that appealing.

However, if you are disciplined, sensible, and have factored in the costs properly, then property ownership becomes a real option for your.  You’ll thank yourself in years to come when you realize any sacrifices you made were more than worth it!  Whilst many of your peers will be stuck renting, you will own an asset that will assist you greatly in generating wealth and future income.

Steve Caradoc-Davies
Director, Harcourts Platinum

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