Rentvesting – 7 Reasons why you should consider Rentvesting

The interest rates have finally started to creep up and adding pressure to our cost of living. Many homeowners are feeling spooked by this rising interest rate, inflation and cost of living. Maybe you’re one of them – you’ve been thinking about selling your home but don’t want to get caught in a downward market. Or maybe you’re just not sure if the property is still the right investment choice for you. If either of these scenarios sounds like you, then maybe it’s time to consider Rentvesting.

What is Rentvesting

You’ve probably heard of “Rentvesting” before – it’s when you buy an investment property where you can afford and rent a home in an ideal location. But now, there’s a new trend in Rentvesting where people choose to move out of their homes and rent them out instead. This way, you can ride the bad property market with a rental income, claim tax benefits for your home while it’s being rented and live in an ideal location that may be closer to work, kids’ school, cheaper rent etc.

Rentvesting can give you the best of both worlds. You can buy a property and rent in the area you want while still having the security of owning your own home.

7 Reasons to Rentvest

There are many reasons why Australians are turning to rentvesting. Below are some of the most common reasons: 

1.  Ride the bad property market – Rentvesting allows you to avoid the impacts of a bad property market. You will still own your home, but its rental income can help cover mortgage payments and other expenses. This gives you more time and flexibility to wait for better conditions before selling the property. Not only that, but rentvesting also allows you to diversify your portfolio to take advantage of opportunities in other markets while still maintaining property ownership. This allows you to generate higher returns potentially and better manage risk than just relying on one asset. Ultimately, rentvesting is a great way to ensure that your investment stays secure despite changes in the market.

2. Tax Advantages – One of the biggest advantages of rentvesting is that all the expenses associated with your investment property are tax deductible (e.g. home loan interest payments, property maintenance, insurance, council rates, depreciation, etc).So, if for some reason, your property investment makes a loss (i.e. the expenses are more than the gross income from rent), you can leverage those losses to reduce your taxable income from your own salary. This is known as negative gearing. Speak to your accountant about the range of tax advantages.

3. Lifestyle – When you buy an investment property, you can often buy in an area that is more affordable than if you were buying your own home. This means you can live in the area you want without sacrificing your lifestyle or budget. For example, if you want to live close to the city but cannot afford the mortgage repayments, you could buy an investment property in a cheaper suburb and rent it out while living close to the city.

4. Invest in areas with high growth potential – By buying an investment property, you can cash in on capital gains when the time is right. This is because as an investor, you have the flexibility to sell your property when the market is strong or hold onto it for long-term growth. For example, if you want to buy in an area with high growth potential but cannot afford it at this stage, you could buy an investment property and rent it out until such time as you can afford to move into the property yourself.

5. Build equity without all the stress – When you own your home, there is always going to be some level of stress involved. This is because your home is a big financial commitment, and if something goes wrong, it could cost you a lot of money. However, when you invest in a property, your tenants are responsible for maintaining the property, and your rental income will cover most of the holding costs. This means you can build equity without all the stress of owning your own home.

6. Flexibility with your finances – One of the benefits of rentvesting is that it frees up some of your income as you’re not paying a mortgage on your own home. If your property earns positive rental income, you can pay off other debts, such as credit cards or personal loans, or it could be used to save for a deposit on another investment property. By having more flexibility with your finances, you’ll be able to reach your financial goals sooner.

7. Not tied down to one location – Another benefit of rentvesting is that it gives you the freedom to move around without selling your home first. This is because, as an investor, you’re not tied down to one location like owner-occupiers are. For example, if you get a job transfer or need to move for personal reasons, you could simply rent out your investment property and move into a rental yourself. There’s no need to go through the hassle and expense of selling up and buying again elsewhere.

Conclusion

Rentvesting offers many benefits over traditional homeownership, including increased flexibility, lower stress levels, and the ability to invest in high-growth areas without breaking the bank. If you’re thinking about switching from traditional homeownership to rentvesting, be sure to speak with a financial advisor or your accountant first so that they can help assess whether it’s right for your circumstances.

How can we help?

If you have any questions or would like further information or property tax advice, please feel free to contact our office via email – [email protected] or phone (02) 8651 8000  to either speak with someone or arrange a time for a meeting so we can discuss your requirements in more detail us your tax, property investment, and business needs.

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