Why your first property should be an investment, not your dream home

Housing affordability has been a hotly debated topic in recent months, with median house prices hitting an all-time high of $1 million.

While it’s certainly tougher to get into the market than in previous generations, there are still things you can do, if you’re prepared to take a slightly different approach.

I see too many first-home buyers go down the wrong path by trying to purchase their dream home straight away instead of thinking like an investor.

Before diving into buying an owner-occupier property, here’s why you should become an investor first.

The trap of the first-home buyer

Most first-home buyers put everything they have into that first purchase, including their savings, income, and full borrowing capacity. And if you plan to live in that property for decades, maybe that’s fine. But what if that property could instead be the launchpad that helps you build a portfolio?

If you decide to buy a home to live in, you ultimately run into a few issues. Firstly, your deposit gets tied up in a non-income-producing asset. Your serviceability is exhausted on a home that generates no cash flow. And because it’s not producing income, there are no tax benefits.

You’ve used all your financial firepower on a property that might not even experience strong capital growth. And just like that, you’ve lost the ability to invest, at least for the foreseeable future.

The investment-first strategy

Buying an investment property first means you’re not limited to where you want to live. Instead, you can target areas around the country with strong capital growth potential, including places with rising demand, healthy rental yields, and planned infrastructure investment.

Let’s say you have a $600,000 budget. If you’re buying to live in, that might only get you a small inner-city apartment, which is an asset type that often underperforms over the long term.

But if you’re buying to invest, that same budget opens up options in high-growth regions across the country. You’re now also looking nationally, not just at what’s around you.

With the right investment, you’ll generate rental income to help offset your mortgage repayments. You’ll also benefit from tax deductions on interest, depreciation, and running costs. Most importantly, you’ll be building equity in a growth-focused asset.

The other advantage is that buying an investment property can also boost your ability to service a loan. Sometimes, it’s difficult to service an owner-occupier property, but if you buy an investment property with a strong yield, that becomes a lot easier, and lenders will often allow you to borrow more.

Some buyers may have the deposit but not the serviceability to buy their own home, but they would be able to service a good investment property.

Use one property to fund the next

This is where the strategy compounds. As your first investment property increases in value, you can access the equity to purchase your next one.

We’ve worked with clients who bought their first investment at 22, used the growth to fund their second by 24, and by 27 were in a position to buy their family home, without the stress of scraping together a deposit or stretching their budget.

They didn’t abandon the dream home. They just delayed it and used smart investing to get there faster, with less financial pressure.

Build first, live later

There’s nothing wrong with wanting the home that suits your lifestyle. But from a financial standpoint, there’s a smarter way to go about it.

When your first purchase is a growth-focused investment, you’re creating a system that builds wealth in the background. You’re gaining tax benefits, increasing leverage, and boosting your options for the future.

Then, when the time is right, you can buy the dream home on your terms. You have to always remember that property is a long-term game, and your first move sets the tone for everything that follows.

So, before you commit to a mortgage on a home just because it ticks your lifestyle boxes, ask yourself if this is helping you to build wealth, or is it holding you back?

Your first property doesn’t have to be your forever home. It just needs to be the right one to get you ahead. Because when you lead with strategy, the lifestyle always follows.