Rentvest is a home-owning approach where you rent a place to reside in that’s ideal for your preferences, while you possess a property investment that’s ideal for your pocket.
As property values in inner-city areas have risen, this approach is becoming more common, particularly among younger homeowners. According to Domain.com.au, about a third of investors were also tenants in 2016.
Why Should I Rentvest?
Initially, it does not seem to make much sense – why pay off mortgages and rental during the same period? Would it not be cheaper to buy your dwelling? There’s really no correct answer to that. It all relies on your finances, stage of life and the lifestyle you choose. For example, you might be young and want to get into the housing market, but the property you want is not in your price bracket. Or maybe you scored a fantastic rental home, and the timeframe isn’t right for a change.
Or, as of now, your content with the inner-city lifestyle, even though you know that later on you’re going to shift to a bigger house. Rentvesting can offer you the perfect combination. You can purchase a home and lease it out to offset some or all of your cost of ownership, while still renting the property where you reside. If you make a profit from your income property, you might also use the money for your home cost of rent.
You could probably spend the same money if you’re just leasing, or if you were living in the house that you purchased. The distinction is, you can stay where you want to and get your toe on the real estate market.
Pros and Cons of Rentvest
You’re choosing to stay where you want
You’re not restricted to wherever you can choose to lease, as a Rentvestor.
Low upkeep expenses for your rented house
As a homeowner, you are most likely not to be liable for any repair costs incurred by normal wear and tear. For instance, if there are problems with the heating service, your agent would arrange a service company (depending on your rental conditions).
Possible tax benefit
You may be entitled to assert such property investment expenditures as write offs. This includes interest on debt, rental costs such as insurance and ads, and depreciation charges. The Australian Tax Office will clarify when you can make these statements.
You may use the investment income on your investment portfolio to pay the mortgage on the house or to pay for your own home rental fees.
Your primary residence is going to be less protected
You could have to relocate if the landlord decides to vacate the property or switch the renters.
You may need to make the premises accessible for review.
Your rental might go up.
The continuing cost of owning a home
As an owner, you will assume responsibility for the expense and maintenance of improvements to your house. You may also be forced to pay charges to a property manager. If your investment yield is less than the cost of maintenance, you would need to make up the gap.
If you’re serious about investing in real estate, it makes perfect sense to get expert advice from a trained financial planner. With the proper approach, you may be on your way to living the dream you want now, while planning for a stable future.