In Australia, there is a long-held belief that one should try to get out of the rental cycle and into your own home. For many people that is not only a dream but also an ideal solution. Unfortunately, tightening markets and rising house prices have meant that some buyers are making sacrifices to their lifestyles, just to get a foot in the door of the property market.
There is an alternative though, and it can prove to be a very smart move, not only in terms of lifestyle but also results. It’s called ‘rentvesting’.
Put simply, after doing your research, as a rentvestor you buy a property in an area that shows stability, attractive rental yields and low vacancy rates. Living in the property is not actually in your plans.
Instead, you’ll continue to enjoy the flexibility, cost advantages, and work and lifestyle benefits of renting somewhere closer to your friends and interests, somewhere more suited to your lifestyle, somewhere more ‘desirable’, or somewhere that gives you greater work-life balance. The rental income you receive from your investment property, should cover most, if not all of your expenses, including your mortgage (taking into account any tax deductions).
By ‘rentvesting’ you enjoy the benefits of owning a property, without having to compromise on your way of life. And it’s particularly attractive in this new era of remote-working, where regional centres are becoming increasingly appealing, and smart rentvestors are benefiting from tight regional rental markets, while taking advantage of lower city rent prices for themselves.
A word of caution though. Rentvesting is not for everyone, and some mortgages and almost all first home buyer grants and concessions stipulate that the owner must live in the property for at least the first six months. Depending on where you live when you sell your investment property, you may miss out on capital gains concessions.
It’s not the end of the world though and a lot of rentvestors see the six months as a tiny inconvenience in a much bigger and more beneficial long-term picture.
To see if rentvesting would work for you, have a chat with one of WhiteStar’s property experts today.