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Should You Buy a Home for Yourself or as an Investment?

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If you’re looking to buy a property, then it’s worth asking whether you need one for yourself or if you’re aiming to rent it out to others. Here are the things you need to consider before making a decision!

Overestimating real estate as investment

Yes, real estate is one of the safest forms of investment there is. There are very few investments out there that are quite a stable and consistent when it comes to making money, even considering the ups and downs of the housing market. But is it really always guaranteed to make you money? Is buying just about any home guaranteed to make you a profit as long as you have patience on your side? You’ve probably already guessed that the answer I’m going to give you is “no”.

If you’re investing in real estate, then the income you make from that property needs to be able to carry the costs incurred from it. You’ve got to think about the mortgage repayments, the utilities, the maintenance, the insurance, the taxes… all of that and possibly more. Some people will take these hits assuming that the home value will skyrocket at some point, paying off everything retrospectively. But neither enough income to make those payments nor a future price to make up for those payments is guaranteed. It’s a bigger risk than it’s often made out to be.

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Considering the mortgage

The mention of mortgage repayments naturally brings us to the matter of how mortgages play into this. The vast majority of people who buy homes – for either purpose – will do so using a mortgage. So the question in this context becomes whether a mortgage should only be used to buy a home for yourself or if it can be used to invest with the intent of renting the place out.

The answer is that a mortgage can be used for both – however, due to you need to have that rent income pay off the required mortgage repayments each month, how much you want to charge for rent becomes slightly out of your hands. The best thing to do is use a mortgage affordability calculator while you’re making your plans.

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The life you want to live

While the financial aspects are incredibly important, most people will decide whether to buy a home for themselves or as an investment based on the lifestyle they want to lead. Those who need a house for themselves, of course, are going to want to go with the first option. Those who are looking to buy their first home as an investment should probably avoid aiming to then purchase another house for their own use, unless they’re incredibly well-off!

While real estate investment in the form of buy-to-rent isn’t the passive income it’s often made out to be (you often have to invest more time and effort into the enterprise than the word “passive” usually implies), it can be great for those who are looking to make an income and are willing to rent a place for the time being. Buying a home for yourself anchors you to certain decisions as to where and how you live, whereas taking the ‘B2R’ investment route offers more freedom through fewer obligations.