Dilleen Property Group 2023

Investing in a property with the intention of potentially moving into it in the future while renting it out temporarily is a strategy that attracts many investors. However, it's a complex approach with several pitfalls. In this blog post, we will explore the reasons why this strategy might not be the most suitable option for an investor.

1. Emotional Biases and Investment:

One of the primary challenges with buying a property with the prospect of future residence is the introduction of a strong emotional element into the investment decision. Buyers often come with a comprehensive list of criteria for their desired property, which includes meeting their family's needs, falling below market value, offering an attractive rental yield, and being located in their preferred area. However, satisfying all these criteria simultaneously can be a difficult task.

This emotional attachment to the property can lead investors to make decisions that might not align with crucial investment principles. They may compromise on factors such as property value or potential rental income to fulfil their emotional desires, potentially leading to less favourable investment outcomes.

2. Unrealistic Expectations:

Investors often have unrealistic expectations when pursuing this strategy. They may seek a property with multiple bedrooms and bathrooms, under a specific budget, which is often unattainable in many markets. When these expectations collide with market realities, disappointment can set in.

3. Dilution of Investment Goals:

The primary objective of any property investment should be to generate a return on investment and build wealth. When the primary focus shifts towards the possibility of living in the property later, this core objective can get diluted. Investors may become overly fixated on finding a property that could serve as both an investment and a future residence, potentially missing out on opportunities that could deliver better returns.

4. Inadequate Knowledge of the New Location:

In many cases, individuals considering this strategy are contemplating a move to a different city or state. They may not possess in-depth knowledge of the new location's property market, neighbourhoods, or local nuances. Attempting to invest remotely under these circumstances without any professional help can be risky and may lead to poor investment decisions.

More Practical Approach

To address these challenges, it is advisable to adopt a more practical approach for those considering a potential move. Instead of attempting to merge investment and future living arrangements into a single property purchase, consider separating them:

1. Invest First: If you are contemplating a move to a new location, focus solely on the investment aspect initially. Conduct comprehensive research on the local property market, collaborate with professionals, and select a property that aligns with your financial goals and investment strategy.

2. Rent Initially: Upon making the move, rent a property in the new location. This approach allows you to gain insight into the area, explore various neighbourhoods, and develop a better understanding of your preferences.

3. Purchase Your Dream Home Later: After settling into your new location and acquiring a deeper understanding of the local property market, you can embark on the search for your ideal home. This approach allows you to make an informed decision about where you want to live without the pressure of combining it with an investment property.

Conclusion:

While the concept of buying a property with the prospect of future residence may appear appealing, it introduces unnecessary complexities and emotional biases into the investment process. The recommendation to separate investment and future living arrangements offers a more practical and potentially profitable approach to achieving property-related objectives. Always remember that successful property investment hinges on prioritising financial goals and making well-informed decisions that align with those objectives. If you’re looking for experts to have a look at your finances for you, you can speak to our broker Justin Picker here. Furthermore, if you’re looking to build your own property portfolio or need help starting your property investing journey, feel free to contact us here to learn more about our services and investment strategy.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.