Rentvesting has gained popularity in Australia as a property acquisition strategy. It involves individuals acquiring real estate, often in the form of investment properties, primarily in rural or regional areas where property prices tend to be more affordable compared to prominent CBD locations like Melbourne or Sydney.
These individuals then seek to lease a property in the central business district (CBD), allowing them to enjoy the advantages of urban living, including convenient transportation, dining options, and access to excellent schools for their children.
Another advantage of rentvesting is the potential to utilize the rental income generated from the purchased properties to cover their own rental expenses.
A lot of the price increases that we’ve seen over the years have been for dwellings in places such as Sydney, Brisbane and Melbourne. It means these properties are out of reach for the average person.
Rentvesting means people can get a foot in the property market and purchase a property in outer areas without giving up the benefits of a city lifestyle.
And often people want to purchase a property, but find it impractical to uproot their lives and relocate to a rural or regional area. So, by buying in these regional, rural, and lower cost areas while renting in the city, they get the best of both worlds.
Some of the benefits of Rentvesting is the freedom to live where you want; without worrying too much about what you can only afford.
Additionally, investing in investment properties, you may get some tax benefits.
You are also afforded some benefits of being a tenant. Those benefits might be if your washing machine or dishwasher is damaged, you’re often not required to pay.
Whilst being a tenant is great and you get some benefits, there’s also downsides to that. One inconvenience is that need to make the property you’re renting available for things like open for inspections. Additionally you may also have to vacate the property if the landlord decides to sell.
As with any investing as well, you’ve also got to make sure to invest right or you may not get the returns you’re expecting.
Some things to consider before rentvesting is what’s important to you. If the city life is important, then Rentvesting may be for you. or, you may want to make a sacrifice and move further out, that’s up to you.
It all depends on what you want, perhaps you’re single and you want to get into the property market but the home you want is out of reach. Or maybe you’ve got a great rental property but its difficult to uproot and move. Or you’re happy with city life and simply don’t want to move.
Rentvesting can give you the the benefits of both options. You can buy a property and rent it out to cover your ownership costs, while continuing to rent the home where you live. If you’re profiting off your investment property, you could even use the extra income towards your home rental costs.
You may end up spending around the same if you were just renting or if you were living in a home you owned. The difference is, this allows you to live where you want and get your foot in the property market.
PROS:
Live where you want: As a Rentvestor, you’re not as limited to where you can afford to buy.
Rental Income: You can use rental income from your investment property to pay your home mortgage or rent.
CONS:
Less Security: You may have to vacate the property if the landlord decides to sell and your rent could increase
Unable to access First Home Owner Grant (FHOG): Since the FHOG isn’t eligible for an investment property, Rentvestors aren’t able to access the benefits of the first home owner grant.
If you need professional guidance, don’t hesitate to contact us today at TPG Property Group.
September 9, 2023
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