It’s the first home-buyers’ catch-cry: ‘We can’t afford to buy our first home. We’re priced out of the market’. But it is really true? There are many ways to get into the property market but this sometimes calls for a bit of creativity. ‘Rentvesting’ is one such way.
Rentvesting refers to the growing trend of buying your first property as an investment while you rent elsewhere. People typically buy somewhere they can afford to (maybe a new, outer suburb with big growth potential) while they rent somewhere they want to live (perhaps an inner-city location minutes from work or a hip-burb close to restaurants and a buzzing nightlife).
Rentvesting is fast becoming the ‘it’ trend in property. We understand the rush to embrace it as there are many advantages to utilising this option. Things like:
Living for now
You live where you want to live and enjoy the lifestyle that’s right for you right now. All the while someone else pays off your mortgage. Perhaps you want to move around to experience different parts of your city or take advantage of an interstate or overseas job opportunity? Renting gives you this freedom. It’s also often cheaper to rent in your ideal location than it is to live in, and pay off, your own place in a lesser location. Some Rentvestors are even staying at home with Mum and Dad while their investment property pays itself off.
Building your wealth portfolio
Rentvesting allows you to get into the property market much quicker than you might have otherwise. Rather than waiting and saving for a huge deposit for that perfect first home in a location you can’t quite afford, you can choose a cheaper – but no less lucrative – property in a location you can afford. Get some renters in there and your mortgage will fast dissipate.
Paying down your debt is also the fastest way to wealth creation. It opens you up to purchasing further rental properties using your investment equity and fast-tracking your wealth portfolio. With a dark cloud hanging over the future of pensions and superannuation, this investment portfolio could one day be your golden retirement nest egg.
You can claim many rental property expenses at tax time. Things like rates, repairs, maintenance, home insurance, land taxes and even advertising for tenants! Furthermore, any repayments you make on interest from an investment property are tax deductible. Other tax benefits like negative gearing and depreciation factors can also come into play.
What about the First-Home Buyers grant?
You want take advantage of the First Home Buyer’s Grant to purchase your first home but you can’t if you rentvest right? Maybe not. If you’re willing to make a short-term sacrifice for a long-term gain, you can have the best of both worlds.
The criteria for the grant stipulates you must live in the property for a year (timeframe can vary from state to state so check your local requirements). So you move in for a year, perhaps sacrificing some travel time to work in the process. But after that you can move out and rent where you really want to live. In the process you turn your home into an investment property and generate a second income stream. Another potentially huge advantage, depending on your circumstances, is there is no capital gains tax payable if a home becomes an investment property and is sold within six years. Something to consider.
I want to Rentvest but I don’t have a deposit. What can I do?
You don’t have quite enough dosh to dish on that deposit to rentvest. Don’t fret, there are a number of options to consider. Think about:
Using ‘the force’
Seek out family members and join forces. Between four or five of you, you can each take out a loan for your share and purchase a property. Just make sure you have an agreement in writing and an exit plan in place. It doesn’t hurt to talk to an expert in property matters before you do too.
Consider a family guarantee loan
See if you can find a relative who is willing to share the spare equity in their property. This is a great way for a family member to give you a hand but not a handout. Again seeking financial advice is paramount here to ensure all is above board.
Now you know what Rentvesting is all about, perhaps you can consider it for your own circumstances. If you are serious about getting into the property game, call us to have a chat. At
The Successful Investor we believe investing in property is one of the soundest ways to build wealth and we love helping people get in the game. Our services are free and we will never pressure you to go ahead with any of our investment recommendations. In fact, we prefer you take your time to consider what we’ve shown you and ask us any follow up questions.
If you are ready to find out more, call us on 1300 800 886 or send us an email at: firstname.lastname@example.org. We looking forward to hearing from you.