If you feel it’s getting harder to buy your first home and you’re looking for another way to get into the property market, there might be another way… rentvesting.
Rentvesting is the term used to describe the situation when someone purchases their first property as an investment. Often it’s because you’re keen to buy a property but you can’t quite afford to buy the type of house you want, in your preferred area.
Whilst there’s an argument this practice makes it harder for other first home buyers to enter the property market – and it’s not something suitable for everyone – if your finances allow, it might be something worth considering.
Here are a few reasons why it can be a good idea.
Your purchasing power doesn’t have to affect your lifestyle
Buying an investment property in a different location from where you want to live – or something smaller than what you would live in yourself – is often more manageable financially.
So, if you can’t afford to buy an owner occupier home in your preferred location, don’t!
If the figures work, you might be able to enjoy the lifestyle you want by buying something to rent out and renting something else yourself to live in.
You may be able to buy property sooner by purchasing something less expensive
The sooner you get into the property market, the sooner the potential to build equity in a property. This equity could then be used to help you purchase additional property – either for investment or owner occupied purposes – later down the track.
You can make smart purchasing decisions
When you’re looking at buying an owner occupied home, there are lots of things to consider. You’re trying to weigh up the decision objectively – for example: Does it represent good value? Is there the potential for growth? However, at the same time it’s very easy to get caught up on the emotional side of things: Can I imagine myself living in this house? Is this a good area for my kids to grow up? Is there enough room for Grandma to stay?
But when you’re buying an investment property, the emotional part of the decision can be shut out and it’s much easier to only look at properties matching your buying criteria. For example, does it represent good value? Is there potential for growth? Will it appeal to renters?
There’s no worry about how your family’s lifestyle could be impacted by living in the investment property (since you won’t be living there) and you’re likely to only pay what the property is worth. Investment properties aren’t known to pull at the heart strings quite so much or encourage you to bid, “just that little bit higher.”
Taxation advantages of buying investment property
Whilst you need to speak to an accountant for specific information on the taxation benefits available to you, deductible costs may include but are not limited to: interest payments, property maintenance, depreciation and related insurances.
There’s also the benefit of having a tenant pay you rent, which will help reduce your overall out-of-pocket expenses.
If rentvesting is something you would like to investigate further, give us a call on 02 6286 6501.
