Financially, given a rental yield of, say, 5%, you're better off buying IPs. You get all the deductions, depreciation, flexibility of renting and perhaps most importantly, you are more likely to view an IP as an investment/business. i.e. you're less likely to over-renovate, and more likely to refinance to buy more property (harder to put debt 'back' on 'your home').
For a young person with no family, I would definitely suggest buying IPs first.
However, having a PPOR gives you a lot of emotional value. The risk I see with buying your PPOR first is that you end up wanting to 'own your own home' so much that you put far too much money into paying off your PPOR loan and neglect your other investments. It's easy to fall into the trap of 'I'll pay off our home and then think about investing', as many do. You end up losing 20 years of returns because you're too focused on cutting the PPOR mortgage.
Alex
Alex has some great points but I lean the other way.
A gross rental yield of 5% , well I doubt that in Brisbane at the moment, but even so a net yield of around 3.5% in my view.
Paying off your own home is a good tax free investment and at the same time you are increasing the equity you have in your property. A 7.5 % mortgage is like a savings account at 10% depending on what tax scale you are on.
Alex might like to correct me on that.
Your current savings account is likely between 1 and 6 percent.
so its a difference of 3.5% net yield V 2% tax advantage by paying your mortgage more or less.
if you can renovate or improve the looks of the ip all the better. that's not so easy to do if you have tenants in a property .Panting over several casual weekends,or months, improving gardens and walkways and small things inside the house can do wonders. With no experience I would not want to be rushed. You can use this as a practise for perhaps renovating other properties.It may also make you realise you are not a renovator.
Remember you own your own home , but you live in the
Hardware store.............believe me its so true for many people.
You don't have to pay off your whole loan on your PPR .
At an appropriate time borrow against your PPR.
If you are going to live in the property, you will definitely look more carefully than if you are going to rent it out for some unknown person to live in.
You can also have a person move in for a while to lower the burden of your payments . eg an airline pilot on interstate hops overnight!
It sounds like you aren't fazed where you live so if you do sell , you have 6 years in which the ppr rule will allow you to sell w/out any CGT. That is a huge savings. You can always move in and out and the 6 year rule starts again from scratch.
eg in an IP after 5 years you have a cgt on $150,000 upon sale, your profit.
.......you just need to know what tax rate you are on to get a figure
if its your PPR then no cgt.
As Alex said there is another advantage besides financial
