You generally advise your readers to buy a house first and invest later, but I am wondering if this is always the best approach. I am currently trying to decide whether to invest in a student accommodation apartment. It costs only $150,000 and I have enough for a 20% deposit. I am thinking the rental income will pay itself off and I can make extra repayments as well. Meanwhile, I will continue to save up for my house deposit. What would be the risks?
Leonard, Your #1 Fan
Be honest: you don’t really want to buy a dog-box in the sky.
What you really want to do is speed up the time it takes to save a house deposit. Other people try doing it with shares, thinking it’s better to own shares in, say, a bank (and be paid a dividend) than to have money in their miserly savings accounts.
Compared to saving up money in the bank, you can currently earn a higher income from property or shares, but your capital will not be secure. And that’s the biggest risk you face: a few years down the track you may find a home you really want to buy … but the banks will knock you back because you own a ‘same-same’ student apartment that’s worth less than you paid for it.