What is Rentvesting and How Does It Work?
Rentvesting has grown in popularity as home prices have risen, providing an alternative for a variety of buyers. Rentvesting is arguably one of the best options for some Australians to enter the market.
What is Rentvesting
Rentvesting is an investment strategy that allows you to benefit from the benefits of renting your dream house while simultaneously owning a property that can be utilised as an investment and rented.
Let’s say you want to reside in Melbourne, Australia, and you’ve set your sights on a luxury home, but you can’t afford it. The next logical step is to look for a less expensive option and settle for it. And that’s where rentvesting comes in.
You can rent this luxury Melbourne home at a lower price while purchasing a home elsewhere, giving you the best of both worlds.
Why Pay Rent and Pay Off a Mortgage at the Same Time?
Rentvesting allows you to live in the home of your dreams while also renting out your own property. But, you don’t have to, rentvesting is entirely up to you. However, as a rentvestor, you can live in your dream home while also being a homeowner who can rent it out to cover some or all of your ownership expenditures while continuing to rent your current residence.
Pros of Rentvesting
- You can live wherever you choose.
- You are not responsible for any maintenance charges incurred due to wear and tear as a tenant.
- Some investment property expenses may be eligible for tax deductions.
- You can utilise the rental income from your investment property to pay off the mortgage or to cover your own home rental bills.
- If the value of your investment property rises, you may be able to sell it for a profit.
- Rentvesting enables you to begin growing your real estate investment portfolio.
- If your circumstances change, you can easily upgrade or downgrade to a different house when you rent.
- If the owner wishes to vacate or change tenants, you may have to relocate.
- Rent may increase.
- You’ll have to pay capital gains tax if you sell your investment properties.
- If the value of your investment property drops, you’ll have to sell it at a loss.
- Investors are not eligible for grants or stamp duty concessions, which are available to first-time property buyers.
Cons of Rentvesting
5 Steps To Follow To Start Rentvesting
Step 1: Conduct research.
Examine the national real estate market for places that are expected to rise. Also, look into rental yields in these areas to see where you can make the most money.
Step 2: Determine a price point.
Determine the pricing point for the place you’re considering.
Step 3. Make a deposit
Put money aside for a down payment and apply for a loan. Home equity and savings are two methods for generating the deposit amount you’ll require.
Step 4: Buy the house and hire a property manager.
Step 5: Rent out the property until you’re ready to move in or sell it.
If you’re considering rentvesting, you should seek professional assistance. With the right strategies and plans in place, you might be living in your dream home while also securing your future.