We all aspire to live a better life. It’s important, however, to know exactly where you are in your own personal journey in homeownership.
Whether you’re a homeowner, renter, investor or aspiring first home buyer, I’m sure there’s one thing we can agree on: we all aspire to live a better life and to live comfortably in retirement.
It’s important, however, to know exactly where you are in your own personal journey in home ownership, building wealth and preparing for retirement, as this will influence the strategies you use to take the next step forward.
We’ll discuss strategies in detail later on, but to give you an idea, they can include things such as maximising government-approved incentives, taking advantage of financial incentives and minimising the amount of tax you pay.
Wondering what this journey looks like?
The overall journey to wealth creation and retirement is loosely shown below:
Non-homeowners can get into the market one of two ways: as a first home buyer, or as a rentvestor. From there, they can move on to their first investment property, or for a rentvestor, move on to more sophisticated investments.
Let’s take a closer look at what these stages mean for you.
First Home Buyer
Most of us start here at some point in our lives. Buying your first home can be one of the scariest things you do, but it will also be one of the most exciting!
Due to the rising house prices in Australia, the average age of first home buyers has increased significantly (to 36 years old, according to a 2020 study). But don’t worry – there’s still time and incentives available to help get you into the market.
Rentvesting is when you rent where you want to live, while you invest in areas where it wouldn’t suit you to live in yourself – usually cheaper areas with higher potential for capital growth, such as the metropolitan outskirts, regional areas or interstate.
On the rent side of things, you would typically rent somewhere where the cost of renting is less than the cost of holding a mortgage, such as an inner-city area.
This is becoming a popular trend for both first home buyers and sophisticated investors who don’t want to sacrifice their lifestyle to create wealth.
By becoming Rentvestors, Australians can enjoy the flexibility of moving to new suburbs and better homes when their lifestyles change, including the ability to move overseas if they desire.
First Time Investor
A first time investor is someone who owns their own home and is looking to buy an investment property for the first time.
An owner-occupier home can actually be one of the biggest expenses for a homeowner, which is why first time investors are typically looking to pay their homes off first. They want to be debt free before looking at building a property portfolio – but this doesn’t have to be the case.
A sophisticated investor is someone who already owns two or more investment properties. They’ve taken the first steps in building a portfolio of properties to pay off their own home and create passive income for a comfortable retirement.
I’ll go into more detail on the above in a later article, including which strategies are best for each stage.
Whether you’re a homeowner, renter, investor or aspiring first home buyer, I’m sure there’s one thing we can agree on: we all aspire to live a better life. It’s important, however, to know exactly where you are in your own personal journey to building wealth and preparing for retirement, as this will influence the strategies you use to take the next step forward.
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