The great Aussie dream to own a house usually starts with PPoR. The emotions run so high that I feel a poem is apt for it:
First home, a dream come true,
But emotions high, expense too.
Excitement mixed with fear and doubt,
Will I make the right choice, will I figure it out?
Heart open, mind wide,
I search and shop with pride,
But overspending, I soon realize,
This dream home comes with a heavy price.
~ Author unknown, stuck in 30 yrs mortgage cycle(pun intended)
Quick fact: On an average, one lives in the same house for less than 5 yrs.
Someone rightly said: Emotional people are poor people(not that anything wrong with it).
Those who love to read:
Primary Place of Residence (PPoR) is a term used to describe the property where an individual or family lives most of the time. It is considered the main residence of an individual, and it is where they have their permanent mailing address, and where they are registered to vote.
Though most investors draw a line between PPoR and IP(investment property) to me at end of the day it is also nothing but a small business like any other IP. One gets different types of tax benefits as compared to IP(I’ll cover this soon in the portfolio strategy series). As soon as one makes up their mind to buy a house, it’s a natural inclination to go after their own house first for many as compared to buying an investment property. Soon comes emotions and, along with that, adrenaline kicks in which bring overspending. We start justifying ourselves that it’s our first home or our dream house so it’s now or never. Furthermore, most investors say why waste money on the rental and buy an investment property instead. The end of the day’s number matters, if one is paying rent of 35k/annum and getting rent of 35k/annum(+/- expenses and taxes), why does it matter?
Let’s be fair if you reading this and I am writing, we are still trying to make it big. We have limited resources and, that’s why we should play with our cards, we are dealt with(as we can’t change our past), rationally. Let’s talk about common scenarios for many with which most of you can resonate in chronological order:
- Young couple in the late 20s (2 bedroom)
- Married and 1 kid + Parents for Asians (3-4 bedroom)
- Married and 2 kids (toddlers+teen) + Parents for Asians (3-5 bedrooms)
- Married with teens + Parents for Asians (4-5 bedrooms)
- Old couple (3 bedrooms) – Longest, we live in this house
As you can see from above, one’s scenario changes every 4-5 yrs and it makes perfect sense to move house accordingly(other factors to move can be school catchments, area preference because of friends/community, new/old house et al). Frankly, it doesn’t make sense for a young couple to live in a five-bedroom bedroom house but still many go for it anyway. This makes a big impact on their investment journey. Because of limited incomes and high spending on PPoR, one tied up all their resources on a single house which impacts their chance to grow faster in the long run.
As for myself, I live in a $3M, five-bedroom house in Sydney, in a high-end suburb because of my kids’ school, for a rent of $900/week and enjoying my portfolio(soon article on different strategies) with an average of $100/week rent on every $100k invested(the golden rule). I know I don’t want to buy a $3M house today, but I can have multiple houses instead elsewhere and still enjoy my lifestyle today, which I otherwise dream of in the years to come.
Time to introspect: The Aussie dream is that one should own a house but does it really have to be a PPoR?