An explanation of rentvesting and how to live where you want while investing in property in other areas.

Buying a property is a high involvement investment, there are so many things to consider like the location, your budget and the overall lifestyle you’d like to lead. As housing prices continue to skyrocket, a term coined 'rentvesting' has become increasingly popular amongst beginners to the property market. 

What IS rentvesting you say? 

To put it simply, rentvesting is where you may choose to purchase a property in an area affordable to you, where you’ve been able to save up the necessary deposit and cover mortgage repayments while then renting in an area that might have been out of your purchasing price range. Thus, giving you the best of both worlds: the start of a property portfolio as well as the freedom to live in the areas most desired via renting. 

The classic ‘Great Australian Dream’ in 2020 looks a lot different to how it once did due to the property climate in Sydney. For example, median housing prices in Sydney are now hovering over $1 million, making it extremely difficult for many new entrants to the property market. 

We’ve put together a list of some of the benefits you may find with rentvesting:

Building your portfolio:

Instead of waiting several years saving a deposit big enough for the location you want to live in but can’t afford, entering the property market in a more affordable home with a smaller deposit gets you in the door building equity on your first home.

Investing in property is generally considered as a much lower risk investment compared to other volatile forms of financial gain such as shares and stocks. Being able to diversify your income streams is a fantastic way to ensure you’re setting yourself and your family up for the future. Most of the time, your investment will gain value, providing you with future opportunities to purchase more property and selling at a higher value than you purchased.
 

Rental income:

By purchasing your investment property and placing tenants in it, you may find yourself in a position where the rental income you’re getting from the tenants is enough to cover close to, if not all of your monthly mortgage repayment costs and property maintenance expenses. 

This will be conditional depending entirely on the type of property that it is, the amenities that are provided for the tenant and the standard rate of rent in the area. If you are successful in covering the majority of the expenses, it could provide you with a greater opportunity to afford a higher amount of rent in the area you choose to live in. 

Live the lifestyle you want, now:

One of the biggest pros to rentvesting is the freedom it provides you in being able to live in the areas you dream about (if the rental prices are within your budget), as well as giving you the option to move around and try out different areas before settling in the one spot. Who says you can’t have your cake and eat it too, right?

You can take on leases that are as short as a few months, so depending on the circumstances life throws upon you, you’re able to upgrade or downgrade where you’re situated quite a bit easier without any stamp duty or legal expenses to worry about. 

Tax Offsets:

At the end of the financial year, you can claim interest payments on your investment property loan as a tax deduction - who wouldn’t love that?! By claiming these deductions, you can reduce your financial short-fall and ultimately, the amount of taxable income that you earn. 
 

If you would like more advice on rentvesting, property management or have any general questions about the market, contact us at Heimat today! Our team are experts in property management and make it our mission to ensure that investors have their investments looked after with top-tier support and service, ensuring you peace of mind.