If you’re struggling to break into the property market due to increasing property prices it’s time you considered rentvesting.
Rentvesting is when you rent a home in your ideal location to live in and buy an investment property in an affordable, well-researched growth area. The main advantage of the rentvesting strategy is that it lets you have the lifestyle you want now, while at the same time building a property portfolio for the future. Let’s take a closer look at four advantages of rentvesting.
1. Tax benefits
Rent or owner-occupied mortgage payments are not tax deductable, however the costs associated with owning an investment property are. According to the Australian Taxation Office (ATO), tax deductible expenses include:
- Advertising for tenants
- Body corporate fees and charges
- Council rates
- Water charges
- Land tax
- Gardening and lawn mowing
- Pest control
- Insurance (building, contents, public liability)
- Interest expenses
- Property agent’s fees and commission
- Repairs and maintenance
- Some legal expenses
- Travel undertaken to inspect the property, to collect the rent or for maintenance.
Even if the investment property is running at a loss, i.e. the rental income is less than the expenses incurred, investors can benefit from negative gearing and still come out positive.
2. Invest where you can afford to buy
You may not be able to afford to buy a home in your ideal location, but chances are you can afford to buy a less expensive property in a well-researched area with projected future growth. This is a great way to break into the property market and start to build an asset base.
And if you’re worried about the ongoing costs, ParkTrent CEO Ron Cross says in most cases an investment property won’t cost you a thing. “Provided you have an income in excess of $50,000 a year, the rental income and negative gearing component should pay 100% of an investment property if that investment property is a new property.
3. Live where you want
Home ownership may not be a viable option for you at the moment for various reasons. For instance, you cannot afford to buy in your ideal location, you’re considering a relocation for work or to be closer to family, you would like to take an extended holiday in the near future, or perhaps you’re happy to continue living with your parents.
Not having a permanent address, and an owner occupied mortgage, provides greater freedom to choose where you live and for how long. The savvy investor knows that living where you want whilst investing in affordable property is the best of both worlds.
4. Invest in your future
It’s never too early to start thinking about your retirement. With uncertainty over the future of the pension, and superannuation unlikely to be enough on its own to cover the costs of retirement living, it pays to prepare now.
A carefully considered property investment plan can help you create wealth independence so you can enjoy financial freedom in your retirement years.
Ready to start rentvesting?
Book a meeting with a ParkTrent Property Consultant to discuss the current market and your long-term objectives. Simply complete the form below and a member of the Customer Service team will be in touch to arrange a suitable time. Alternatively call the team weekdays between 9am and 5pm on (02) 4225 2440.