It’s likely this is the first time you’ve heard the term ‘Rentvesting’, but it’s likely you’ll hear it more often as the word becomes just as popular as the activity it describes.
Rentvesting is the term used when a home buyer chooses to purchase their first home as an investment, instead of living in it.
The trend has become so popular that it’s estimated around one third of first home buyers are now Rentvestors, indicating that more young Australians are choosing to stay at home with their parents a little longer in order to enter the property market or renting elsewhere with friends.
It’s also a great opportunity for first home buyers who want to take advantage of getting into the property market sooner without sacrificing the lifestyle they have now.
Benefits of Rentvesting
The Rentvesting strategy provides first-time buyers with many benefits, both financial and non-financial including the following:
- Tax benefits: Buyers receive all the tax benefits of a property investor, including depreciation and negative gearing
- Rental Income: The rent received from the investment goes towards the loan repayments and can, at times, be enough to cover the mortgage
- Enter the property market sooner: you have the opportunity to get your foot in the door of the property market sooner
- Opportunity to reduce mortgage balance: Sticking to your Rentvesting plan for a couple of years could help to pay down the amount of money you owe on your investment mortgage, which helps to build your equity faster
- Flexibility: By renting, the investor is able to live where they want and in their ideal location where they can afford the rent but not necessarily afford to purchase a home in that area, i.e. Close to the CBD.
- Choose where to invest: the suburb you want to live in won’t necessarily be the same area where you buy your investment property. You can choose to buy a property in an area with strong rental demand and good rental yields while you rent in the area where you prefer to live.
- Fast-track plans to upgrade: taking advantage of rental income, plus tax benefits, plus the option of paying down your mortgage more quickly could all contribute towards fast-tracking your plans to upgrade to a nicer home in the area you want to live in
- Build wealth: Rentvesting is ideal for those who want to start building wealth. The tenants pay rent that will help to cover your mortgage costs and you have the opportunity to take advantage of any potential capital growth over time
- Opens up new markets: Rentvesting opens up interstate markets or locations that might not be where you want to live, but might be great for investment purposes
- Easier to relocate: Renting also provides the young investor with the flexibility of being able to relocate more easily, or take advantage of extended travel
Rentvesting may not be a new concept, but it is one that is increasing in popularity as investors take advantage of the many benefits.
If you’d like to know more about whether Rentvesting is the right strategy for you, call us today on 1300 832 554 and discuss your options.
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