October 24, 2017

What is rentvesting and is it a good idea?

Who doesn’t want to have their dream home? Owning a home is a great achievement. However, with the ever increasing prices of real estate in Australia, it has become difficult to enter the market. People who cannot afford to buy their dream home enter the real estate industry through rentvesting.

What is 'rentvesting'?

This is the process of renting a home and investing in property that you can afford.

This is the process of renting a home and investing in property that you can afford. If your dream home is a three-bedroom home in the city centre, the prices obviously are high and you may not be able to afford it as of the moment. With rentvesting, you will rent the property that you want then buy a property in an area where prices are within your budget. You can turn it into investment property which can help you pay your rental payments.

Is rentvesting a good idea? Here are some points to think about:

Your purchasing power doesn’t affect the lifestyle that you want.

Rentvesting enables you to live your preferred lifestyle and at the same time, have an extra income and build your property portfolio.

You can have a property sooner and with a smaller deposit.

Rentvesting allows you to enter the property market sooner, which will help in building equity. Eventually, you can use the equity to buy another property as investment.

Buying an investment property offers tax advantages.

Rentvesting comes with deductible costs such as interest payments, property maintenance, insurance, as well as depreciation. Take note that it is better to seek advice from an accountant so you will better understand the taxation advantages that you can get from your property.

You can make smart decisions when purchasing a property.

Buying a home comes with a lot of emotions since it’s your dream and you already have a picture in mind of the kind of life that you and your family will have when you live in the house. On the other hand, buying an investment property doesn’t come with emotions that you have when buying your dream home. When it comes to the investment property, you think about its potential ROI.

So, is rentvesting a good idea? It really depends on your goals. Bear in mind that this method of entering the real estate industry is not for everyone. Make sure to understand how investing in real estate works and determine if rentvesting will work well for you.

Do you think rentvesting is a good idea? Share your real estate tips in the comments section.

About the author  ⁄ Marxa Dillan

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