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Home Ownership Vs. Property Investment

homeowner versus investorHomeowners and property investors want their properties to reflect different ideas. A home owner will never set his sights on a property that interferes with his idea of a residence. For him, a home needs to be a mirror of his inclinations, penchants, and driving force of life. A property investor, on the other hand, will hardly care if a property passes his personal test. For him, how his property investment shapes up in the eyes of potential tenants is more important. Will it suit a wide range of them, including but not limited to, students, daily commuters, young couples and double income households? This will perennially remain a question on his mind.

Mortgage repayment versus capital growth/rental yield

When we buy a home for ourselves, we may think about building equity in it and using it to purchase another house but the first thing in mind is always the mortgage repayments. Will I be able to make the mortgage repayments? What loan tenure will I be looking at? The perspective may differ sharply for someone who goes for a property investment. He may be inclined to think along the lines of capital growth and rental yield.

For him, a sound portfolio may be one which is neutrally geared (cumulatively) and hence is a mix of negatively and positively geared properties. Now, based on his knowledge of the property market, he would select which model the property he is looking for has to suit: the capital growth/negative gearing model or the rental yield/positive gearing model.

Property managers and the issue of maintenance

Homeowners typically have no qualms at all when it comes to maintenance. After, it is their own property, so they take care of it any way they can. This reduces repair and maintenance costs. On top of this, they themselves live in the aforesaid property, so they do not have to hire property managers to get maintenance work done.

On the other side of the scale lie the property investors, who typically have the money to capitalise on the real estate business, but not the time to manage the entire show themselves. For them, property managers are absolutely essential. These are professionals who screen tenants, take rent, look after the repair and maintenance of the property investment, take up the cause of council compliance protocols, and bring delinquent tenants in line. Because they rent out their homes, property investors also sometimes have to deal with property damage or even liability lawsuits.

Both pursuits have their advantages

In short, homeowners and property investors are, in more ways than one, on opposite ends of the pole. However, there is no denying the inherent beauty of both their pursuits. Which one you choose to be may depend on where you stand in life, what your immediate goal is and how you envisage life.