Should You Buy Your Own Home or a Buy-to-Let First? Tips for First Time Buyers and Investors 2022

Are you unsure whether to buy your own home or an investment property first? In this blog I’m going to show you the top things that you need to consider before you make this decision. 

YOUR OWN HOME OR INVESTMENT PROPERTY FIRST?

Following graduation in 2017, I bought my first investment property and have since then continued to build my property portfolio. Make sure you stay until the end because I’ll give you a complete breakdown of one of my investments so that you can decide if it’s right for you.

The first thing you need to know when it comes to buying an investment property versus your own home is that an investment property is going to require a much larger deposit. 

So right now in the uk you’re going to be able to buy your own home with a 5 deposit or a 10 deposit whereas if you want to buy a buy-to-let you’re going to need to put down 25. 

This is because the bank or your mortgage lender requires more security when it’s an investment property and that translates to you having more skin in the game, are you putting down a larger deposit. So it really depends on how much money you’ve saved or how much money you can save as to whether you can afford to get an investment property as your first one. What you want to do is look at property prices in the area that you’re interested in and then calculate how much of a deposit you need. 

The next thing you need to bear in mind is stamp duty land tax in the uk this is a tax that you pay every time you purchase a property and this is tiered according to the purchase price of the property and how many properties you own. 

So the more properties you own the more stamp duty land tax you’ll pay. I’ve dropped a link below with the most recent rates for stamp duty land tax so that you can work out how much you would be paying. 

Now as of the time of filming this video we have a stamp duty relief for first time buyers in the uk so what this means is that you will either pay no stamp duty or a reduced rate of stamp duty. If you’re a first-time buyer depending on the purchase price of your property. 

Again you want to have a look at the latest guidance for this and I’ve linked that in the description box below so whether you choose to buy an investment property or your own home you’re going to be using up your stamp duty of relief as a first-time buyer. 

Stamp Duty Land Tax: https://www.gov.uk/topic/business-tax/stamp-taxes

With this in mind a lot of people opt to buy the more expensive property first so that they can make a bigger saving and if you live somewhere like London that’s typically going to be your own home. Now I don’t agree with this and that’s not something I would do so make sure you stay until the end to find out why. 

The next thing to consider is your long-term goals, so do you want to build a property portfolio and become financially independent or do you have a job that you’re happy in or other income streams to support you. 

Because if you buy your own home you’ll have those mortgage payments to keep up with so you’ll likely have to stay in your job versus when you buy an investment property the rental profits can cover your living expenses meaning that you can become financially independent. 

So for me I live off of my property income and that rental income has allowed me the freedom and the flexibility to start a business so let me know in the comments below are you a first-time buyer and what do you plan to buy first an investment property or your own home. 

Now you may be wondering what I would do if I could do it all again would I do the exact same thing. 

I would buy an investment property before I own my own house because a buy-to-let is an asset, which means it’s something that brings you income every month. Your own house, as wonderful as it is, is actually a liability, so you’ll actually be out of pocket by owning a home. By buying a buy-to-let, you will still have the benefits of owning a home. 

As a result, you will still benefit from capital appreciation when the property increases in value. Not only that but if you are renting then you can also offset or completely cover your rental expenses with your investment income and having that extra income every month is going to allow you to save up for a deposit on your own home much much faster.   

I just want to give you a bit of an idea of the numbers behind my first buy-to-let investment. Due to the property purchase price being 130k, I didn’t have to pay any stamp duty, but I lost my first-time buyer relief because I was no longer a first-time buyer and my deposit was 25 so it was 32 500 pounds. 

Now the rental income from this property is 800 pounds a month but that is the gross profit because it’s before all of the costs have been deducted the net profit after all of the costs have been removed is 575 per month. So this particular buy-to-let brings in close to 7 grand of net profit per year. 

If you have run your numbers and you know how much of a deposit you need to save for your own home then using my investment as an example you can pretty much calculate how quickly you’d get there if you were to buy an investment property first. So as you can see in my opinion I think most people would be much better off starting to build their property portfolio first but it’s also really down to your personal circumstances there’s no one-size-fits-all but hopefully this blog will help you make a better and more informed decision. 

If you found this useful then make sure you give it a like. You may also want to check out this blog post here:

which gives you the full breakdown of my first buy-to-let and also this blog here:

which tells you the top mistakes to avoid if you’re investing in property for the first time.  

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