Property is one of the biggest mediums of investing all around the world but finding a home should be a major focus too. Join us this week as we jump into principal places of residence and some things to look out for.
Andrew’s Homes Journey
Over the course of his life and career, Host Andrew Baxter has moved around a lot, estimating a total of 14 different primary places of residence along the way. As anyone with a family and children knows, moving from place to place only gets harder as there are more additions to the family over time. It can bring about some emotion as deciding on your permanent place to live is never an easy one. Although ensuring you are happy with living somewhere, a lot of people make great profits on the tax free components of PPRs so by that token, making measured decisions is greatly important.
Tax Benefits of PPRs
The first major benefit that sticks out when it comes to PPRs is that there is no capital gains tax associated with increases to house prices. There is also no land tax that comes with a PPR and this can be a large saving compared to investment properties which can be taxed quite heavily. There are certain factors that can contribute to this and have a different effect. Although there is that inclination to think of it as a decision for you and your family and making money off it is not a major factor but if you can manage to work it into your decision and make it an added focus, you may be better off in the long run. Certainly, if you are looking to move around a bit like Host Andrew Baxter, you may start to realise how important it is to be turning a profit from your properties as you buy and sell them over time.
The process of buying property can be broken up into 3 key factors – location, affordability and functionality. Host Andrew Baxter notes that it’s great to have a home in a great location, but if you can’t afford it it will cause more harm than good in the long run. Affordability is very important to consider as ultimately it is the deciding factor as if you have not got sufficient funds then you may not be able to work with any given location of functionality. An important consideration from an affordability perspective is changes to interest rates. Mortgage repayments are largely based on interest being charged on the loan which can increase and decrease with interest rates and if you have entered a mortgage being totally financially stretched and then all of a sudden your mortgage repayments increase, you may find yourself in some fairly difficult circumstances financially. Rather than stretching yourself, firstly make sure you are buying something that you can afford to avoid catastrophe.
Functionality and Location
At different stages in life, we all have different needs for our homes. Host Andrew Baxter recalls that his first home was what one may call a bachelor pad and that this is most certainly not suitable for his life now. This is why the layout and functionality of your PPR is a key factor in deciding where you want to live. Likewise, the location of your PPR will change as your needs do. If you are young and new in the workforce, you may be more interested in a central location which is more convenient for work, sacrificing size and quietness for the purposes of convenience. To the contrary, as your family grows and you need more space, you may need to shift out to the suburbs in order to find a suitable house to raise a family. All in all, like picking a trading or investing strategy, you need to ensure the home you choose aligns with your needs at the time.