With 2016 now well and truly upon us, lots of people are re-assessing their investment strategies and property goals for 2016.
With a rise in “Rentvesting”, or renting while you buy an investment property, could this smart investment strategy be for you? While it’s been a popular way for young and first home buyers to enter the property market, it may also be an effective way to live in some of Melbourne’s most sought after suburbs and make money while you do.
Should I consider “Rentvesting”?
If you want to live in an expensive location (where the cost of renting is less than paying an owner-occupier mortgage), investing in a more affordable property could be for you. Your tenant’s rent will help to pay off your loan, and you’ll get a foot on the property ladder.
- You get to live where you want, when you want, for how long you want. If retaining mobility for work, social or school reasons matters to you, “rentvesting” is a great way to position yourself and your family exactly where you need to be. It’s a solution that can grow and change as your circumstances do. Live in the city when you’re young. Move into a school zone when you’re parenting. Downsize when it suits you.
- You get more choice over what you live in. Without the limits of the mortgage you can afford, you have greater choice over where and what you live in. If you’re looking to live in a property valued over $1 million, the cost of renting vs. buying starts to swing in your favour.
- You can reduce the costs of homeownership. Land tax, strata fees or general upkeep of the home you invest in is likely to be much less than the higher valued property you rent. You can also eliminate the entry and exit costs (stamp duty, legals & agent selling costs) by not having to sell your home to move.
- You can control your budget. With little room to alter mortgage payments, “rentvesting” offers the most flexible approach to budgeting. Want to save for a holiday? Move to a cheaper rental for a year. Got a promotion? Move to a better neighbourhood. The flexibility of renting gives you power to adjust your budget for every age and stage of life.
- You can benefit from maximum tax deductibility. In most cases the interest repayments on an investment property are fully tax deductible. This makes “rentvesting” a smart investment proposition.
- You can invest in areas with better profit potential. Whilst your preferred area to live in may make social sense, it may offer little growth potential. “Rentvesting” allows you to invest your money in areas with maximum growth potential – and live where it suits you.
Looking to Rentvest in 2016?
Our team of experienced buyers agents can assist you to find the best investment property for your needs and budget. Unlock your financial flexibility and speak to one of our expert buyers agents about “Rentvesting” today on (03) 9645 3418.