RENTVESTING
What is Rentvesting?
To rent or to buy? That is the question facing many first home buyers grappling with the housing affordability crisis. As property prices continue to rise, it’s becoming increasingly difficult for first home buyers to break into the market, prompting some to consider whether renting a home may work out to be more affordable than buying a property.
Owning a home was once a cornerstone of the Great Australian Dream. However, thanks to skyrocketing property prices, the dream is starting to take a different shape for some. Breaking into the property market is extremely difficult for many first-time buyers.
This has led to the rise of rentvesting: instead of buying the property they want, people rent a home and then invest their leftover money elsewhere.
Pros and cons of rentvesting
Pros
- Enter the property market sooner. Rentvesting allows you to break into the property market sooner with a smaller deposit, as opposed to waiting several years until you are able to afford your dream home.
- Live the lifestyle you want. If rental prices allow, you can live in your dream home now and not have to compromise on location or features, and you don’t have to worry about taking on the long-term commitment of a big mortgage.
- Build wealth. Rentvesting allows you to start building your investment property portfolio, which can be used to generate wealth for you and your family in the future.
- Save for your dream home. Owning an investment property allows you to save to buy your dream home.
- Flexibility. When you’re renting, you can easily upgrade or downgrade to a different home if your circumstances change, for example if you lose your job or get a high-paying promotion, with no stamp duty expenses or legal costs to worry about.
- Move around. If you’re not ready to put down permanent roots in a particular area, rentvesting gives you the freedom to move around and even travel the world if you wish.
- Tax benefits. You can claim interest payments on your investment property loan as a tax deduction.
- Choose where to invest. Where you want to live and the best place to buy an investment property often won’t be the same, so rentvesting allows you to be ruthless when it comes to choosing an investment.
Cons
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- Buying an investment first. Buying an investment property before purchasing your own home can seem counterintuitive to many people.
- Dead money. The old adage that “rent money is dead money” may be a deterrent for some people considering this approach.
- You don’t own your home. As much as you may love your rental property, you don’t own it. This can be especially difficult if you form an emotional connection to a house but then the landlord wants you to move out.
- You can’t make it your own. Although a rental property might be vastly improved by a renovation project or simply a fresh coat of paint, remember that it’s not yours to tinker with.
We have assisted many clients enter the property market using ‘rentvesting’ techniques. We are here to make the dream of owning a home a reality.
