What you should consider if you are thinking of Rentvesting
By | 18th Jun 18

So what do you need to know before taking the leap?

We are a city of rentvestors and with many first home and multiple homebuyers choosing this strategy to get their foot on the property ladder are we creating an affordability issue for the next generation of buyers? This new way of investing has seen a surge in popularity due to certain tax incentives.

So what do you need to know before taking the leap?

The pros

If you can afford to enter the property market but are not ready for the lifestyle change that investment might present, rentvesting could be a great option for you. Many first homebuyers are using this technique to purchase property as an investment while renting in the areas that they enjoy.

The traditional mindset of living where you purchase is now out the window, with the opportunity to leverage tax incentives and rental returns without compromising on the lifestyle you are living. Ensure that you look closely at the type of investment property you are purchasing in relation to the property you are renting by evaluating your cash flow as this will be important for this strategy to work for you. We recommend understanding your investment strategy ie: negative gearing vs positive gearing and yield vs capita growth.

The Cons

A recent study by the Reserve Bank of Australia revealed that there has been very little difference in the long-term benefits of rentvesting with the rising rents and property boom levelling out people’s financial situation. Further commentary notes that some people would have been in a better position to buy a primary place of residence first.

With any investment, in general it is imperative to have a plan or strategy in place to take into account the length at which you want to keep your investment and the flow on effects of this. Do you have an exit strategy? Do you have limits or ways to reinvest if something unforeseeable happens in the property market? It is important to be honest with yourself in these situations so you are prepared for best case and worst-case scenarios.

 

 

With over 18 years of experience as property investors, property owners and buyer’s agents, we are here to help you. We can help you navigate the sometimes daunting a task of starting your property portfolio and setting yourself for success. Make your free consultation appointment today! Email us or call us on 03 9886 8900