Are you stuck between renting or buying, but you can’t afford a property in the place you want to live in? Then you should do both – sort of.
Rentvesting is a property investment strategy where you rent the property you want to live in, but purchase a property elsewhere so you can rent it out to help cover your own rental payments.
This property investment strategy is suitable for most people, though it works best in areas where there’s a significant difference between monthly rent and mortgage payments. It’s also well-suited to the younger crowd of budding homebuyers who feel like the price of inner-city living is out of their reach.
Though at the end of the day, rentvesting comes down to your budget, life stage and the lifestyle that you want to have. In this blog, we investigate the benefits of rentvesting and how you can get started on your investment journey.
Rentvesting is an excellent way to make your mark in the property landscape sooner. By purchasing an investment property in a more affordable location, such as regional or outer-city areas, you’re becoming a tenant and may be eligible for some tax benefits. Additionally, by focusing solely on the investment aspect of your purchase, there’s not as much emotional luggage that you need to drag around – it’s just an investment!
In a similar vein, rentvesting gives you the opportunity to live where you want, how you want. If you’re a regular city-goer, then you can rent a property within or close to your CBD. Want to live closer to work? Then you find a place to rent that’s just a few blocks away. With rentvesting, your living locations are only limited by your budget and lifestyle choices. It gives you the opportunity to live in your dream home and location now, while not committing to a long-term mortgage.
There are also numerous tax benefits that you can potentially claim from your investment property, such as rental insurances and advertising. But be sure to check out the Australian Taxation Office website for more information about what you can claim on your tax return.
Like with any property purchase, it’s important that you have enough of a deposit to increase your borrowing capacity. Aiming for at least a 20% deposit for your investment property is the rule of thumb, though if you have the money to invest more than 20%, then you will borrow less money. This means that you have a better chance of earning some profit and you won’t have to pay lender’s mortgage insurance.
Using tools such as a mortgage calculator or home loan calculator can help you work out what your borrowing capacity is.
You should also do your research to have a comprehensive understanding of the property market before you enter it. As part of your research, you should also work out the estimated sums you will need before taking a leap and investing.
When in doubt about property investment, it’s always best to contact the professionals. Here at 1st Street Financial, we have award winning mortgage brokers that can help you on your rentvestment journey. Get in touch today!
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We’ve worked with clients across Australia to access the different first home owner grants (FHOG) as well as the various stamp duty and other concessions that may be available depending on which state you are in. We can talk you through your various options as well as helping you compare things like buying vacant land vs. an established home.
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