Rentvesting is simply where you rent a property to live in, in an area where you want to live that suits your lifestyle needs, and purchase an investment property where you can afford.
With increasing property prices and it becoming harder for young people to save for a deposit or afford a mortgage in the city, this strategy is becoming increasingly popular in Australia.
So, if you’re considering this option, it’s important to weigh up the pros and cons:
- You can enter the property market sooner and get a foot on the ladder.
- You can live the lifestyle you want.If rental prices allow, you can live in your dream home now and you don’t have to worry about taking on the long-term commitment of a big mortgage.
- You can build wealth.Rentvesting allows you to start building your investment property portfolio, which can be used to generate wealth for you and your family for the future.
- It helps you to continue to save.
- It allows for great flexibility.When you’re renting, you can easily upgrade or downgrade to a different home and also move to live in different areas.
- It has tax benefits.You can claim interest payments and tax deductions for the outgoings on your investment property/s.
- The old adage that “rent money is dead money” may be a deterrent for some people considering this approach, although this is changing amongst today’s home buyers and investors.
- You don’t own your home.As much as you may love your rental property, you don’t own it.
- You may be asked to leave your rental property at the end of the lease if the owner wants to sell or move into it.
- You can’t really make it your own, or add too many of your own touches. If you want to renovate it, you can’t. Even if you add hooks to the wall you will need to remove them and return the property to the original condition when you move out.
It’s important to consider the above in relation to your own circumstances and long-term goals. In property investment, it’s so important to ‘know your why’ as this will inform your strategy and the tactics that you use, so rentvesting may or may not be suitable for you.
By Lloyd Edge
About Lloyd: Lloyd Edge, Director and Founder of Aus Property Professionals, is a buyer’s agent, property strategist, and author of ‘Positively Geared’. Positively Geared details his journey and offers simple and easy to follow steps to achieve a property portfolio that will future proof your income, starting with a $40K deposit. Lloyd was a finalist in the 2020 Real Estate Business Awards for Buyer’s Agent of the Year and the REINSW Awards.