To rent or buy? That’s the question many Australians are currently asking. But what if you could do both? Well now you can, thanks to rentvesting. Rentvesting is a relatively new concept and an innovative way of getting a foot in the door of the property market. The idea behind rentvesting is simple: rent a property in the location you want to live and buy a property in the location you can afford, renting that out instead.
When you consider the cost of rent is usually a fraction of the cost of mortgage repayments, it seems logical. And it’s becoming more and more popular, revolutionising home ownership – especially among first home buyers. In fact, according to a national survey conducted in 2015, 36.6% of investors were rentvestors, compared to just 21.2% in 2014. So, if you’re tossing up between renting or buying, here are the top 7 things you need to know about rentvesting.
- Rentvesting enables you to avoid the increasing struggles that come with buying your first home, because rather than drowning in the debt of a mortgage, you’re having someone (your tenant and the tax man) assist you in covering most of the costs.
- It allows you to live where you want, to enjoy all of your desired lifestyle needs. Often, the most affordable homes are ones that are in less than desirable locations, far from work, family and/or preferred lifestyle facilities.
- Rentvesting helps you overcome the expectation problem that has become prevalent in Australia. Many of us have been brought up to believe we need to own the home we live in, but this simply isn’t the case. People are trying too hard to own the home of their dreams, when they could just rent it instead and invest their hard-earned money elsewhere.
- Rentvestors have realised the value in paying rent at a property that is in their dream location, for a fraction of the price of a mortgage in the same area. They understand the importance of buying in a good location that has investment potential while being affordable.
- Rentvesting is easier to afford. Selecting a property within your price range also means the deposit needed will likely be much lower, so it won’t require years of saving. By lowering your deposit goal, you’ll find it easier to achieve.
- Rentvesting is about flipping your thinking. You can still have access to your lifestyle without owning any of it. You don’t have to own something in order to enjoy it. Don’t own anything that won’t make you money. Put your capacity into a rental property and structure it the right way, so it costs you next to nothing while giving you a great lifestyle because you can afford to live where you want through renting.
- Rentvesting still requires a careful strategy and lots of prior research. Choosing the right property is key in ensuring rentvesting works for you, so begin by identifying the best locations and housing that will bode well not only for an investment, but for your budget. It’s tempting to get carried away and buying something out of your price range, thinking you’ll just make the money back in no time, but investing doesn’t work like that. It takes time and precision to get it right, so don’t dive in and sign on the dotted line before you’ve weighed up all your options.
Don’t bury yourself financially just to live in a trendy area. Lower your expectation and rentvest. It’ll allow you to live in fantastic locations, inside beautiful properties, while you own through investments that are making you money. Any property investor knows that the sooner you get into the game, the sooner you’ll begin building your wealth, and rentvesting is a great way to do just that.
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