Everything to Know About Rentvesting
What is and why it’s the perfect way to get into the property market
When it comes to financial decisions, buying an investment property is one of the biggest you can make as you have the opportunity to build a successful portfolio.
At this time, you may want to consider a strategy called rentvesting.
If you’re struggling to purchase a property you want to live in but you want to enter the property market, rentvesting might just be the perfect place for you to start.
What is rentvesting?
Rentvesting is gaining popularity for first home buyers who are struggling to save for a deposit for their ‘ideal home’ but still want to enter the property space.
It involves renting in the suburb or city that you want to live in while purchasing an investment property in a more affordable location.
Doing this means you get to enter the property market at a more affordable price point, build equity through ownership and not make any sacrifices on living in the area you want to live in.
The best case scenario is that you will have rental income covering most or all of your mortgage repayments – so that you can still put money away to save and combine this with the equity in your investment property to purchase your dream home.
Why should you consider rentvesting?
Rentvesting really does give you the best of both worlds.
You can live where you want and still own an investment property. Rentvesting is the perfect strategy if you want to continue living in a specific suburb but you also want to start building an investment portfolio ASAP.
Whether you want to stay close to the city for work or you’re renting in a specific school zone for your kids, there are so many factors that might contribute to rentvesting being the best option for you and your family
What are the pros and cons of rentvesting?
Like anything, rentvesting of course has its pros and cons, these are some of the factors you might want to consider when you’re thinking about rentvesting.
Pros
- You get to live wherever you want – not just where you can afford to buy!
- Low maintenance costs when you rent, as a tenant you won’t have to pay for any maintenance if something goes wrong in your home, your agent will organise a repair for you.
- Tax benefits! ! You may be able to claim some investment property expenses as tax deductions at tax time.
- You will be earning extra income from leasing out your property to pay the mortgage repayments or put towards a deposit in the suburb you are wanting to live in.
- As your investment property will increase in value over time, you will also make a profit in the future!
Cons
- Your primary residence is less secure and you may have to move if the owner wants to sell the property, vacate the property or move into their property.
- You’ll have ongoing costs as a landlord with your investment property and you will be responsible for costs associated with repairs for your tenants.
- If you decide to sell your investment property you’ll need to pay tax on your capital gains.
- You will be unable to access the first home owners grant as you are not purchasing an owner-occupied property.
- You may have to sell your investment property at a loss if it decreases in value.
Seek expert advice when considering rentvesting
If you’re thinking about rentvesting or you’re wanting some guidance on the best way for you to get into the property market and start building your portfolio, seeking advice from experts is crucial. At AllianceCorp, our team of investment property experts can help guide you through the process of rentvesting so that you can make an informed decision that’s best for you.
Book a free consultation with one of our investment property advisors today and begin the journey to becoming a property owner!