Wanting

to

enter

the

property

market

but

can’t

afford

properties

where

you

want

to

live?

Why

not

Rentvest?

With housing prices having outpaced wage inflation in recent history, there are many people out there looking to buy their own homes, but being outpriced out of the areas where they ideally would like to live. So, what are the options?

• Keep saving… but property prices keep climbing and leave you perpetually out of reach, even if you were to invest to try and boost the returns on savings.
• Buy a cheaper property elsewhere as a stepping stone while you keep saving… but you may hate it where you end up living. Are you prepared to sacrifice whilst you build towards your dream home?
• Rentvest!

Rentvesting involves buying a cheaper property as an investment, whilst you continue renting in an area that you want to live in.

Why?

With Sydney rental prices averaging 3% (that is, you are paying 3% of the property value in rent per year), renting can be a smaller financial outlay compared to paying 6.5% p.a. interest on a home loan to buy and live in that same property. But many people say that rent is “dead money” – whereas paying off a loan is putting your money towards ownership of an asset!

So, this is where Rentvesting comes in. Rental yields of cheaper properties/houses in different states or even outer regions of NSW can be higher. If you work your numbers right, Rentvesting could potentially leave you with a cheaper loan repayment (from a lower purchase) whilst you live in your preferred location, with rental income that helps go towards covering your own rent payments.

Other benefits:

- You have a property investment/asset that can help build towards buying your dream home in future.

- You can claim the costs of owning the property (including interest on your mortgage) as tax-deductions against the rental income, with any net losses accrued over time to offset future property net profits or Capital Gains.

Why not?

- Investing comes with risks. With Property that includes tenancy issues, which could leave you without income if the property doesn’t have a tenant, whilst you still need to cover all the ongoing costs – including mortgage repayments.

- Property values can go up or down. Property price growth in different areas can differ. Investing in a property in a less desirable area compared to your dream home can still leave you lagging behind in any goals to upgrade to your dream home over time.

- Recent changes in tax legislation rules out negative gearing of net property losses against other forms of income, and implementing a minimum capital gains tax of 30% on investments, with some exemptions.

There are many different factors to consider when thinking about making any big investment decision, including when Rentvesting. You should seek guidance from a qualified Financial Advisor before making any decisions.