Rentvesting
Own Property and maintain lifestyle
Many young people believe that to own property they must give p their inner city lifestyle, pack up and move to the sticks. What if there was a way to maintain a coffee loving, avocado rich lifestyle at the local café whilst enjoying the benefits of financial gain and capital growth from property? In other words (to quote a successful Mexican themed food ad) “Why not have both??”
A proven strategy for many can involve purchasing an investment property within their budget in a location with good growth potential whilst continuing to rent in their desired area.Often people argue that they are able to afford the rent where they choose to live however are no chance of purchasing due to the high price. Why not change hat perspective?
An individual or couple may choose to continue to rent in their chosen location whilst taking their saved deposit and purchasing an investment property.Ideally this purchase is made within their budget, in an area with good growth potential and which the rent will go some way in covering the mortgage repayments. There are numerous advantages in this strategy:
Tax – the costs involved in holding the investment property can have positive tax outcomes. Interest paid on the loan is deductible along with many other expenses. They are not on a primary place of residence. See Tax Professional.
No Restrictions on Where To Buy – the property can be purchased in any location. It is not restricted by the person’s location, need to get to work, schooling, family, etc. This opens up more options to enter a better growth market that may not have been possible if purchasing to live in
Purchase is Unemotional – As the purchaser will not live there it enables them to be unemotional about the decision. It becomes purely a numbers and financial decision on what will give a good return. There may be certain features an owner occupier would like if purchasing for themselves that may not be needed if bought for an investment purchase.
Flexibility – Often people don’t know what they really want or require in their younger years. Circumstances change, family size increases, job/career opportunities, perceptions, needs and wants.‘Rentvesting’ enables time for these to become clear all whilst gaining the financial rewards of a well selected property asset.
It should be recognised that there are some negatives when using this strategy. There are often limitations and struggles with renting. There’s nothing like owning your own home when looking at it from an emotional perspective. I’ve personally done both (rented and lived in my own home). It was an incredible experience and achievement purchasing/building and raising our children in our own home. However, it must be acknowledged that we have just as much fun and love just as much whilst renting.
- The Tattooed Investor