Some of you may have heard the term rentvesting in recent years. It’s the concept of wanting to live in the CBD, but you can’t afford to buy there, so instead, you buy in an area you can afford, turn it into an investment and rent where you actually want to live.
Rentvesting gives you the best of both worlds – buying an asset while having opportunity to live wherever you like.
What are the pros of rentvesting?
Lifestyle
One of the key pros of rentvesting is the ability to live in a wide range of suburbs. Some highly sought-after areas are affordable for renting, whereas buying in the area may be very expensive. Renting in such an area may give you a shorter commute to work, nightlife or access to good schools, a safe neighbourhood, a higher standard of property and lifestyle amenities.
Enjoy the perks of being a tenant
As a property investor, you know that all repairs and maintenance are the landlord’s responsibility. Rentvesting allows you to take advantage of this convenience in the place you rent, while any repairs and maintenance on your investment property are a tax deduction (make your money work for you!).
Location flexibility
One of the best parts about renting is that you can live in a range of areas, choosing to try somewhere else once your current lease ends. Not so easy to do when you buy a home (stamp duty alone is cost prohibitive)
Higher borrowing power
If it works for your financial situation, rentvesting may give you more borrowing power once you factor in the ongoing rent you expect to receive from the property. The more you pay off the mortgage over time, the more equity you have and generally speaking, you also get to consider capital growth as well!
What are the cons of rentvesting?
While there are many benefits to rentvesting, there are also some downsides you need to consider. These downsides include loss of capital gains tax exemptions, less freedom with personalising the property you rent and the uncertainty of renting.
Overall
Depending on your desired lifestyle and wealth-building goals, rentvesting may be a strategy that could work for you – especially if you’re keen to value lifestyle choices! Make sure you speak with a qualified financial adviser to discuss your situation and long-term goals before making any significant financial decisions.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.