With housing affordability a topic of concern, we thought it would be a good time to share a concept known to some, but still unfamiliar to most…as ‘RENTVESTING!’
‘Rentvesting’ in simple terms is choosing to rent a property in a desired location (often a location unaffordable for you to buy in) and then using your surplus cash and savings to purchase an investment property in a more affordable location.
Let’s weigh up the Pros and Cons to each…
| Owner Occupied (Pros) | Owner Occupied (Cons) |
| The property is yours until you choose to sell it |
It may not be affordable to buy the house you want to live in for some time, leaving you out of the market for a longer period |
|
You can make changes to your home without asking permission
|
To live in a desired location can come at a greater out of pocket cost i.e. higher upfront and ongoing costs.
|
| You won’t pay tax on any profit made when you sell
|
Your ongoing costs like repairs and maintenance are not covered by a Landlord or Strata
|
| Government Grants and Stamp duty concessions can help First Home Buyers
|
There are no tax deductions on repairs, rates and maintenance related to your owner-occupied home
|
| Renting and buying an Investment (Pros)
|
Renting and buying an Investment (Cons)
|
| You could rent in an area that is not affordable to buy in, creating the lifestyle you desire at a more affordable cost
|
You will pay tax on any profit made if you have to sell your investment property
|
| Renting could make it more affordable to live closer to better job opportunities as well as reducing commuting time
|
You will pay tax on any profit made if you have to sell your investment property
|
| Your rates and repairs are covered by your landlord
|
You may have to vacate where you are living if the landlord wants to move in or sell the property |
| With the surplus money you save by renting, you could buy an investment property in a more affordable area that allows you to get into the property market sooner | |
|
You could buy in an area that has a higher rental yield that will contribute towards your income and lifestyle
You can claim expenses on investment properties that can lead to income tax deductions |
In summary:
- There is no right or wrong answer, many people still choose to buy an owner-occupied home if affordable to do so
- ‘Rentvesting’ is an idea to think about if you can’t afford to buy in your desired location yet, but would like to invest your money in property sooner rather than later
- Consider the pros and cons to each and always discuss your short and long-term goals with your Accountant, Broker and Financial Planner first
If you, or someone you know needs help understanding your options, then please get in touch today as we would love to help!