With increased living costs and interest rates climbing, is the great Australian dream of owning a home still possible? YES, IT IS still possible, and here’s how.
Rentvesting.
Wondering what Rentvesting is? Keep reading.
Rentvesting is a home-owning strategy where you rent a property right for your lifestyle while you own an investment property right for your budget. Rentvesting isn’t for everyone.
Here are the pros and cons of it and what you need to consider before you jump in.
The positives for rentvesting
- A start at getting into owning a property: Rentvesting allows you to enter the property market with a smaller deposit and work towards buying the home you want, giving you long-term security.
- Lifestyle: If you want to live in a trendy neighbourhood or one that is out of your budget, with rentvesting, you could rent and live the lifestyle you want and invest elsewhere while still building your property portfolio.
- Flexibility: Renting allows you to move around if your circumstances change.
- Tax benefits: The tax perks can be great about owning an investment property. Your property expenses can be offset against your income. Make sure you check with your accountant before investing.
The cons of rentvesting
While rentvesting might sound like the perfect way to get into the property market it isn’t necessarily a good option for everyone. Here are some of the disadvantages for new homeowners and those already in the market:
- You miss out on the First Home Owners’ Grant (FHOG): If you are a first home owner and you decide to buy an investment property before you buy a home to live in, you will be unable to access the FHOG or stamp duty exemptions or concessions for your property. Unfortunately, you need to be a first-time owner-occupier.
- Added responsibility: Renting and being a landlord simultaneously means you’ll have multiple expenses to cover. You will need to pay rent and cover costs, including council rates, insurance, property management fees, maintenance, and mortgage repayments.
- No control of rental terms: Renting means you won’t have control over how long you can stay, which means you may have to move regularly.
- Capital Gains Tax: If your investment property increases, you may be stung Capital Gains Tax when the time comes to sell.
Wondering where a great place to buy is?
A new analysis from Property Investment Professionals of Australia (PIPA) has identified the top five areas to rentvest in 2022:
- Casey City Council (Melbourne)
- Moreton Bay Regional Council (Brisbane)
- City of Onkaparinga (Adelaide)
- City of Sterling (Perth)
- Penrith City Council (Sydney)
While these are a great guide, it’s important to research things like capital growth potential and rental yield.
Are you interested in hearing more about rentvesting?
If you would like to learn more about rentvesting, get in touch. We’ll help you to explore finance options to suit your needs.
Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal, nor to imply any recommendation or opinion about a financial product. It does not consider your personal situation and may not be relevant to circumstances. Before taking action, consider your circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
