What is the difference between buying a home for living or for Investment?
Buying a property is a big financial decision no matter what stage in life you're at and saving a deposit to buy the first property is a dream held by many. This is mainly because real estate has long been the go-to investment for those looking to build long-term wealth for generations.
As the International Property Show (IPS) draws closer, it is very critical to know the difference between investing in the two as it helps in final decision making. IPS is a platform that brings thousands of genuine buyers and investors together under one roof and comes at a time when the real estate industry is booming with so many benefits.
The past decade has seen a significant increase in Dubai's real estate investment and this can be attributed to its tax-free rental yields and the mature and transparent real estate market which makes it easier for all buyers. Moreover, Dubai is the first Emirate to allow foreign nationals and expats for buying property in Dubai.
Whether you're preparing for retirement, your family's future, or a change in lifestyle, this article looks at the differences between what it means to buy a property for investment compared to buying property for a living.
Home and Investment Property.
Here's a major difference: while your family home functions as a primary residence that's bought with the heart, an investment property should be bought with a business mind. It's a business that should provide you with maximum returns.
Here is a definition of the two:
What is an investment property?
Broadly speaking, an investment property is a property you do not live in and is used to generate profit through renting or appreciation. Buying an investment property makes you eligible for tax deductions, especially if the property is used as a rental. By renting, you can claim expenses for repairs, management, cleaning, supplies, and insurance premiums.
What is a primary residence (Home)?
A primary residence is simply the home you live in. Home will provide security and happy memories for you and your family. If you live in multiple houses, then the one you live in for most of the year is your home.
The difference in buying in these properties:
Probably the biggest way in which a home differs from an investment property is that its primary purpose is as a shelter, rather than a business. When you buy an investment property, you can choose the timing of your purchase to ensure you buy and sell when you get the best possible return.
However, this is not always possible with a home. As it's your primary residence, usually you buy it when it's needed and sell when you're ready to move on, so you'll often have little control over the timing. This lack of control can have a negative effect on your financial situation because you're forced to buy when the market is high and sell when it's low.
- There is an old adage in real estate investing that you make your money when you buy, not when you sell. That’s because unlike buying a residence to live in, buying an income property for investment is all about the numbers, and there are many more metrics than just a simple sales comparable analysis to consider.
- Tax benefits are one potential benefit of owning an investment property.
- One important keynote of putting your cash into an investment property is the appreciation of its value over time.
NB: Buy a property that is suitable for renting, appealing to tenants, and appropriate for the market.
- When you buy a property to live in (Home), you are looking at just one metric: Sales comparables. You want to see that the house is priced appropriately on a per-square-foot basis compared to other houses like it in the neighborhood. If the house needs work, you want to make sure the cost of the work won’t make the cost of the house higher than that of others around it once the repairs are completed. If you’re buying that same house as an investment that you plan to rent to tenants, you not only want to run sales comparables, but you also want to make sure that the monthly rent you’re likely to get is much higher than your monthly expenses and / mortgage payments on the property.
- The advantage of private property is also that you are able to renovate to suit your tastes and needs, having the security of ownership, and feeling a sense of pride in your home are important factors to many people.
Many are keen to know the answer to the elusive question- What is the difference between buying a home for living or for investment? However, the truth is that there is no straightforward answer to the same. In order to make a successful investment, we must gauge our outcome expectations’ and conduct some on-the-ground research to verify if the numbers add up.
Don’t miss the chance and meet with developers for primary and secondary homes and more, we urge you to attend The International Property Show to be held 24th – 26th March 2022 at the Dubai World Trade Centre, where you will get a more insightful approach to this subject as it will be a one-on-one event. The platform will have separate activities all designed to make it a rewarding event for the attendees.