Buying the right first property is the key to your investment journey.

Many people buy their first property for self-occupation and focus only on its residential attributes, overlooking its capital appreciation potential. This can hinder their progress on the investment path. For ordinary individuals without other substantial assets, buying the right first property is crucial for their investment journey. If you make the right choice with your first property, purchasing the second and third investment properties becomes much easier, setting your property investment journey on a positive track.

Considering the sequence of property purchases, it is common for the first property to be a self-occupied one. However, it is important to highly prioritize its capital appreciation potential. The equity gained from the appreciation of the first property can be refinanced to provide funds for purchasing the second property. Once you get the first property right, things become progressively easier. If the first property is not a good investment in terms of capital appreciation and has already consumed a significant portion of your loan capacity, purchasing the second property will be more challenging.

Moreover, self-occupied properties also benefit from capital gains tax exemptions. Do not waste any opportunity for tax reductions unless there is a better opportunity. 

We had a client who initially wanted to buy a home and didn't care much about capital appreciation, as long as it provided comfortable living. When we asked, "If in 10 years, while others' property prices have doubled, yours has only increased by 30%, would you regret your initial decision?" After contemplating, she admitted that she might regret it.

Indeed, a correct investment decision can lead to differences in the range of millions or even tens of millions in the future. To avoid regrets, it is crucial to make the right choices from the beginning.

Some friends ask whether capital appreciation or potential cash flow is more important when buying a home. We suggest that when purchasing a home, there is no need to overly focus on potential cash flow unless you find a property that offers excellent capital appreciation and cash flow simultaneously. It is better to sacrifice cash flow and pursue high returns in capital appreciation. This is because only capital appreciation allows you to benefit from compounding effects, while the cash flow received during the holding period will lower the base value necessary for compounding appreciation. This will undoubtedly affect the overall investment returns. Additionally, since this property is for self-occupation, it will not generate cash flow at all.

Furthermore, in terms of investment sequence, it is advisable to initially purchase properties with good capital appreciation potential. As you expand your portfolio, your loan capacity may decrease, and the pressure of repayments will increase. At this point, gradually invest in properties with good cash flow. The properties you previously purchased with good capital appreciation potential can provide funds for future purchases through refinancing.

Of course, to improve your loan capacity, you can also consider purchasing an investment property as your first property. Each buyer's situation is unique, and property purchase strategies may vary.

If you encounter any challenge buying property in Australia and require professional assistance, please contact us.

We are JL Property, an independent and professional buyers agent in Australia.

Disclaimer: The information provided is not intended to be legal, financial, or professional advice. It is for general informational purposes only. Any reliance on the information provided is at your own risk.