A long-term renter and happy about it. Have you discovered the secret investing back door – Rentvesting?
There’s nothing more frustrating than to build a dream of owning your own home, get excited when you find a property you fell in love with, only to have your finance specialist utter those heartbreaking words – ‘You can’t afford it!’
Many are left feeling deflated and resigned to renting for the rest of their lives.
However, many others determined to get into the property market are not accepting no for an answer and have discovered a so-called secret back-door to getting into the property market.
It’s called Rentvesting.
Rentvesting is a scenario whereby you remain renting your place of residence and purchase an investment property instead.
Whilst this is not necessarily a solution for everyone, depending on your circumstances, this could be just the ticket you need to get into the property market sooner.
Discover what your home is worth in today's market
I’m not going to go through all the pros and cons of rentvesting in this article. You can find plenty of articles on this topic if you deem it one worthy of further research. You might also like to add some of your favourite Pro’s or Con’s in the comment below – I welcome your input and experiences. My intention is to introduce this concept to those who desperately want to own their home and have been turned away due to lack of finance affordability. In some cases, by literally a bee’s whisker! If you’re at a loss as to how you could ever own your own home, this could be the answer.
The Advantages of Rentvesting
Let’s look at a few reasons this could be for you…
1. It could get you into the market sooner. Maybe you have a decent deposit saved up yet, your finance specialist has said you still can’t afford your dream home. By re-jigging the numbers, you could remain renting and purchase a lower priced property receiving healthy rent. This could make all the difference to go from a decline to a bright green approval.
2. Live where you want to, in the nicest suburbs. Ok, so maybe the dream home is a bit out of your reach for now. Maybe you need to live close to the City for work and travel reasons. This enables you to be figuratively ‘living beyond your means’ without the price-tag. Still try to keep the costs down, you don’t want to over-commit yourself.
3. Live and purchase in two different States. Depending on your life-style choices, you might need to live in one State for work purposes but want to buy in another State, maybe because that’s where your family are and where you want to end up in the future or vice versa. Purchase prices and rents are vastly different in each State and in different regions. This can enable you to map out the perfect plan for your current and future situations.
4. Chase the higher rental yields. When buying an investment property many will tell you to buy without emotion and look at the numbers – you may never ever live there. If you’re happy living in the right suburb whilst renting, now you’re not limited to where you might buy as an investor. Your property expert will be more than excited to show you where the best rental returns are happening on their stock lists. By achieving top rental income, this could push your affordability over the line and start you on your journey as a property owner.
5. Property investors receive tax benefits. Now that you’re an investor, you are eligible for tax benefits such as depreciation, deductible interest, investment property expense deductions on your tax return. Make sure you engage an excellent accountant (if you haven’t already) so they can set you up to maximise your benefits – the difference can be thousands of dollars each year.
John J Maxwell