Discussion - Rich Dad view on buying your a home to live in Vs first investment property

[alexb-d 5]

So i just wanted to get my thoughts out there and get others view on this.

I have read Rich Dad Poor Dad and found it was a great eye opener and simplifies a lot when it comes to finance.

I have thought a lot about the term in that book of "owning a house is a liability" and i know that the two Robs have challenged this idea on one of their pod casts and have seen people asking this time and again.

I am also sure a lot of people are in the same boat as me and have a similar worry/concern.

I rent a 3 bedroom house and pay £795 per month but I want to start my property investment/trading business but also buy/live in my own home. But, I only have enough capitol currently for one house.

So i have thought long and hard on this and came to the conclusion that buying a house to live in isn't necessary a liability as mentioned in the book. 

And here is my thoughts why; as it will enable me to pocket almost £600 per month saving on my rent, so from my view point is, this is a profit per month and thus an asset versus a liability as it increases my cash flow.

But am i wrong?

Whats others thoughts on this?

Thanks
Alex

[nicholas_b 45]

If you're saving 600pcm a month when comparing rent to a mortgage then that's brilliant. Obviously factoring in the money required for a deposit but thats still a great saving.

You would be hard pushed to find a rental property which will give you that as a net cash flow per month so it certainly looks a better option to me.

Factor in you'll need a smaller deposit for a resi than a BTL, and you'll quicken the amount of time you can start making a saving then it appears a no brainer. Add to this capital value increasing against a depreciating loan amount and it stacks up.

You always risk something going wrong with a BTL and what is imagined an asset can quickly become a headache and overall liability.

 

Secure your own home first. Put the savings aside to get a BTL. Dont get too hung up on what the book says, some of it is a bit fantasy tbh. I do like the book and its simplicity but dont live by it, it's a very different era to now.

[julia urquhart 155]

I agree that buying and securing your own home first is the way to go. It will save you money (cheaper than renting), allow you to access the best mortgage rates (residential mortgages are lower than BTL and you can borrow more), and teach you a lot about owning property. Then save hard and get your deposit for your BTL.

Although buying a rental first may seem appealing imagine what would happen if your tenant stopped paying / trashed the place etc - would this put your own (rented) home at risk?

Other factors not always considered: how does buying rental first impact you in terms of FTB status and SDLT when you buy a home for yourself and what are the tax implications when you add the rental to your salary? The money you make in your own home is pretty much tax free whereas anything from a rental will be taxed to high heaven!

Whatever you decide to do - good luck

[amasonestates 0]

Buying your own home 1st will make it easier to get a BTL mortgage, also I would consider renting a room out, income from this isn't taxed so you can save even faster for the BTL property