Is it an evil best avoided?
Unless you grossly overpay or you can't service it, buying a PPOR is hardly ever a financial evil.
Rather I'd reserve the term 'financial evil' to things like bottled water, buying new cars on credit, quack medicines and those dinky 'snack' cracker biscuit packs with cheese that cost 4 times per biscuit as the usual 200g packs.
While not evil, buying a PPOR may have an opportunity cost.
The degree of this opportunity cost depends on your stage in investing and your income.
Eg:
a. low income earner just starting out: buying a PPOR potentially kills off buying IPs due to likely reduced serviceability. 1 PPOR = 3 IPs and only 1/3 the portfolio size and therefore reduced capital growth potential for the same negative cashflow.
b. established investor with a few IPs, not on particularly high income: Already running out of tax deductions so tax benefits of (say) the 5th IP isn't as compelling as for the first or second. So a PPOR isn't as bad relatively speaking. And the relativities regarding possible portfolio size aren't as great (eg $200k vs $600k for new investor as against $1.5 vs $2.0m for more established investor).
c. high income earner: can afford it so doesn't matter and little opportunity cost.
Has it got everything to do with your investment strategy or nothing at all?
While it is conventional wisdom to keep the two seperate (Wakelin et al), buying a PPOR with an investor mindset can mitigate the liabilities of having a non-deductible mortgage and potentially high negative cashflow. Indeed I would go further and say you must mitigate unless your income is high and/or you don't want to buy more IPs.
Such mitigation measures could include:
* Having a few IPs under your belt first (see above)
* Buying a PPOR in a 'quality' location, eg inner city or bayside (especially if to balance against IPs in cheaper or country areas and provide a diversived asset base). Or the reverse - buying a cheap place in the bush to live in while keeping metropolitan IPs.
* Buying a PPOR that's below your means to keep mortgage payments affordable, not throw out portfolio balance and ensure the next IP can be bought sooner rather than later. Eg if your portfolio is $1m then a $500k PPOR may kill you financially. But a $200k PPOR might be fine.
* Buying a PPOR that has a 'twist' that you think has not been factored into the price you pay. Especially if it also has potential for minor renovation/value-adding, with potential revaluing/use of equity later.
* Buying at a time when the market is soft (ie now!) and/or negotiating on price as you would an IP rather than the home you love (ie without emotion). Or just finding one with a cheap advertised price and just paying that.
* Buying a PPOR that would make an excellent IP if times get tough and you have to move out/let it to make ends meet.
I followed all the above mitigation measures in choosing my PPOR and don't regret it!
Peter