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What is Rentvesting and is it Right for You

For first time buyers or seasoned investors getting a foothold in a desired suburb seems unattainable. But what if you could live in the home of your dreams whilst also being able to call yourself a homeowner? That’s the reality for the many Australians who have turned to rentvesting to get the perfect balance of lifestyle and budget.

If you’re considering this strategy, or you’re simply not having luck at auctions in a chosen postcode, here are some things you’ll need to consider to decide if rentvesting is right for you.

First, what is it exactly?

Rentvesting is combining the benefits of renting and purchasing, to create a strategy that allows you to live the lifestyle you want – without the price tag that’s beyond your means. To take advantage of this strategy, an individual will purchase a property that’s within their budget and use this as an investment property that is rented out to tenants. At the same time, the homeowner rents a property in the suburb they wanted but was out of their price range.

For example, you may wish to live in an inner city suburb, or a property near the coast. With prices climbing at steady rates, purchasing may not be option. Instead, you’ll purchase a home a little further out from the city at a price you can afford. Once tenants move in that rent money is then used to cover your own rental costs in your coastal dream home. All the while you’ll still have a solid investment to your name.

Some pros

There are definitely some benefits to using this method. Not only will you live in the house you wanted, you’ll be able to enter the property market sooner as you purchase within the lower price range. For those whose circumstances might change, whether for work, family or preferences, not being locked into a mortgage for the home you’re in gives you flexibility. This allows you to test neighbourhoods out before you settle down in an owner-occupied home.

From a monetary point of view, being an investment property owner could have some added benefits such as tax deductions. Of course, you should always speak to your accountant about the type of benefits you could expect from an investment property before you make a decision.

Some downsides

While you can get the best of both worlds, rentvesting will certainly come at a cost. Not only will you have a mortgage; you’ll also have your own rent to pay, so you’ll need to be pretty savvy with budgeting and know what’s possible for you. The rent from your investment may be enough to cover mortgage payments, if it isn’t you’ll need to consider whether covering the remainder as well as a whole rental payment is worth it to live the lifestyle you desire.

As with any investment property owner, you’ll need to consider the stresses that come from finding the right tenants for the home you own. Property maintenance may be something you don’t have time for and the wrong tenant may cause you more headaches in the long run.

As a renter, you may be able to live the lifestyle you want in the right suburb, but you won’t be able to make those personal changes in the home. As a renter you’ll need to accept a property as is and any changes need to be approved by the owner.

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