If you buy your home as an investment with a view to making an investors return then you are not as concerned about a cosy living space but about potential. Never the less your own home is likely to be the largest or one of the largest purchases you make until you have more investment funds.
Investment Potential in your Own Home
- When making your purchase you will be thinking of investment potential and creating a growing financial asset. You will be planning to trade on when the time is right to realise the investment and buy somewhere else to live.
- Select a property in a ‘hot spot’ or area where you expect the local property values to increase.
- If you buy with a view to improving the house (doing up a wreck) your renovation costs must be controlled. It is too easy to spend more than the likely return.
- Buying a property with development potential needs an understanding of planning rules. Extra rooms, loft conversions and extensions can add value but take care of the cost/value equation.
- Building a second home in the garden has been very successful but there is currently a ground swell against this practice.
- A large property may be capable of sub-division into flats and apartments.
- Rents from lodgers and tenants or B&B income may become part of your investment return.
Pros & Cons of Investing in your Own Home
- As you intend to live in the home until a profit can be realised you are likely to take more care with the selection and purchase than you may with a buy to let property.
- Because the property is your main residence there should be no capital gains tax to pay. On a new build you may be able to reclaim Vat
- You have the advantages of living in the home whilst the gains are hopefully accruing.
- The downsides include a potentially long stay until the market is right to sell.
- Moving too quickly can lead to a disrupted family life.
- You need to factor in the costs of every sale and move.
- There is a risk property prices will go down or renovation costs over run.
Comment
Your own home is an investment. Treat it as such and you will reap rewards whilst still having a place to call your own.
Trading up after your first planned sale may give you the opportunity to buy two properties one to live in and repeat the process, the other to set up as a rental property.
Investing or reinvesting in your own home works so why take equity out of your property to invest in shares or something you do not understand or can’t touch and control.
Check out
Property Investment Strategies
The Upsides of Property Investing here
and The downside of Property Investing here
