There are some so-called financial experts that actually suggest that NOT owning your own home and renting a house (forever) is a good financial strategy. I wonder if these same people actually do this themselves or they’re just blowing hot air with their own agenda to promote?
Sure there are no tax advantages to a home mortgage for a principal place of residence but it’s the great Australian dream, right? And the reality is that if it’s done properly, you do actually get some wealth creation benefits from owning your own home.
First and foremost, there is the major benefit that any profits from the sale of a principal place are tax-free. So if you make the right choice with buying and selling your home and you make a profit from some capital gain, then you get to keep all of it.
Of course the right choice here again would be to up-grade into a bigger and/or nicer home for your family and enjoy living in a home that perhaps you’ll be able to sell some years down the track and make a handsome capital gain and roll this over into improving your overall family position.
It all sounds like a piece of cake doesn’t it but the reality is you have to have a strategy with this type of plan just like with everything else.
The important point not to be missed is that a house and a home are two different things in terms of our emotional value to the property and what it represents to your family as a whole.
Now there’s nothing wrong with going about this strategy with a profit outlook in mind, but I always say to people who want to undertake the buying-a-home-and-selling-for-a-profit thing to always keep in mind the fact that the house you’re buying is going to be your home for at least a few years and when it comes time to sell it for a profit, it’ll probably be to someone else who wants it to be a family home, rather than a profit-making exercise.
Being in the financial services business for so long I’ve seen some people who have made a real success of this strategy and have, over time, accumulated a very tidy sum of money and increased their net worth substantially.
I’ve also seen some people who made a complete botch-up of it and gotten nowhere.
What’s the difference between the two? I would say it’s been the home/house attitude from the outset. Of course there has to be basics of what makes a property increase in value which has always been, and always will be, location!
Location doesn’t have to mean expensive suburbs by the way. There are good locations in every price bracket from low, medium through to high priced properties and profits can be made in each of these price categories.
What typifies location? Usually close to everything that people want such as transport, schools, shops, recreation etc.
The other factor here comes back to making your house a home!
Remember, you and your family are going to be living there for at least a few years, so make it a home and enjoy it whilst you’re there and when the time comes to sell and move on and make some money and up-grade to a nicer home this should happen by simple default.
There’s another thing to take into account as well and that’s timing.
Timing of the property market is something no one can pick exactly and and course if your timing in a particular “home” doesn’t match the up-side of the property market then you’re going to be disappointed with what you’ll be able to achieve from the sale of your home.
I’m also assuming here that throughout the time you’ve been living in this “home” you’ve been diligent in it’s upkeep and maintenance as this will play an important part in the home’s eventual sale to another family.
All of these things need to be taken into account but like everyone I know who have improved their net worth by buying and selling homes, they’ve done it because they’ve focused on having a home first and a profit-making house second and they’ve been patient.
Patience isn’t always something that many of us have when it comes to money but it’s a very important trait that we need to have because the lack of it can cause you to loose more money than you’ll ever make.
The author of this article Gary Fabian, is the principal of Precision Advisory and has been working in the financial services and property industries for over 30 years now. He is also the proud owner of a family home!
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