So, you’re thinking about investing in property…
…the usual route would be first buy your own home and use the leverage to invest later, right?
This might work for some… but you would definitely be taking the long road to wealth creation…
…and I’m sure you’d agree that isn’t the best option…
…Starting early will almost always work in your favour.
With millennials struggling to take a step up on the property ladder, owning a home can seem like a far-off dream…
… So what other options do you have?
Investing in hot spot locations and living wherever you please.
That is the motto of the investors who forgo buying their place of residence and instead look for investment opportunities while renting where they choose to live.
You might’ve already heard about rentvestors.
It became a bit of a buzzword when property prices started heating up, locking the younger generations out of the housing market…
Instead of letting the market get away from them, these savvy investors turned the traditional formula on its head.
…And it worked.
By scouting out opportunities that would give you the best investment returns, you don’t need to have the stress of a mortgage over your head.
You can still own property and you have even more flexibility with how you want to live your lifestyle.
How does it work then? It is really quite simple.
Yes there are a few drawbacks and yes there are many benefits.
I want to take a look at how rentvesting could be the answer to the question to “how can I invest in property when I am stuck paying rent?”
….Not only are you in the best position to get started, you have the freedom and flexibility to live in areas that you would normally be unable to afford.
Now if you happen to already own your own home, there is no need to feel envy.
Rentvesting isn’t a one or the other type strategy.
You could still pick a suburb that is closer to work or has a great lifestyle and rent out your existing home.
It is that easy!
Before you start packing, let’s take a look at the pros and cons of rentvesting as a strategy.
We will start with the most obvious pro, living in your dream location…
…Let’s say you are in your 20s or 30s and enjoy the social scene of the city.
….You are sick and tired of working all day and having to take the train back home spending an hour in a crowded carriage.
…You want to live in the heart of the action and close to work but it would take a miracle or many years climbing the property ladder to afford something that would suit your lifestyle.
It doesn’t always make sense to invest in these city areas since the yields are low and growth can be volatile…
….It is actually cheaper to rent in many of these locations.
Even better, you don’t have to commit to one location if you grow tired of city life and want to start a family.
Rentvesting gives you massive flexibility.
You change jobs, no problem just move.
You decide to pack up and move close to the beach, just reach the end of your lease.
If something happens to break or go wrong in your home, just call your property manager and have it taken care of.
…Time to start looking for investment opportunities.
….These could be areas that have high growth potential, greater cash flow opportunities, or maybe the suburb fits give you more for your budget.
For those who have read our High-Performance Property guide, you would know exactly what to look for and where to find these opportunities.
Another positive for living a rentvesting lifestyle means you can claim tax benefits on your investments.
Whenever expenses arise such as maintenance or interest payments, you can deduct these from your tax.
This improves your cash flow and you pay less tax. Something you can’t do when it comes to your own home.
…It’s not just maintenance either. There are so many expenses that can come up when you own your own home.
Want to live in an apartment with a few facilities like a pool, gym, or BBQ area? Be prepared to pay a fortune in body corporate fees.
How about having a nice manicured garden and lawn? That’s usually a service for the owner to pay.
It all adds up.
…You can then make the decision to either purchase your own home with the added leverage or make the move to continue buying investments, compounding the affect.
…Now there are of course some downsides to rentvesting. It’s not for everyone so it makes sense to do your research.
While you’re renting, that money is going straight to paying off someone else’s mortgage. For some people this gives them the idea that rent money is dead money.
…Depending on where you decide to live, you might even be better off buying a house there.
Make sure the suburb you decide to rent in makes sense for your strategy.
Don’t rent in an affordable area where you would be better of just buying.
If you don’t have a dream location you want to live yet can’t afford, rentvesting might not be for you.
If you are a first home buyer looking to get started in the market, understand that rentvesting might mean you lose out on some incentives.
This isn’t necessarily a bad thing.
Just something to consider.
…What you might gain in first home buyer grants could be outweighed by the opportunities created through rentvesting if you look into price growth.
Take a look at the raw numbers, consider the High Performance Property Principles and assess each opportunity.
Grant money doesn’t always translate to a better deal.
Finally, when you are looking at ownership, there are many benefits of living in your own home you can’t get when renting.
If you want to make changes to your home, the landlord might have other ideas.
Do you want to change that ugly rent wallpaper into something a bit more calming?
…Tough, you signed the lease, you have to deal with it.
Owning your own home does give you a lot of flexibility but at the same time, it can be a liability..
…The interest you pay towards your mortgage can go straight to the bank whereas investment properties are run more like a business.
You know you are getting a return on your investment and will grow your wealth over time. Sometimes that money is better put to work not just to keep a roof over your head.
Rentvesting is certainly a strategy worth looking into. It might not work for everyone but if you are struggling to make a start in real estate investment, it does have many advantages.
If you have a dream location in mind that doesn’t stack up for buying, renting is an option.
…You don’t have to give up on your dreams of property investing to live a flexible lifestyle in a suburb of your choice.
You can still build wealth and create your dream life while still paying rent.
If you approach the strategy in the right way, you can even have the best of both worlds.
As you continue to build your property portfolio while renting, you can build enough wealth that you can purchase your dream home when you are ready to take the leap.
There is a way to do this that is much faster and more straightforward than just purchasing the property next door.
By selecting positive cash flow properties, in high growth areas, with value add potential, using our High Performance Property Principles, you can make this happen much sooner.
If you have any questions, feel welcome to get in touch and we can point you in the right direction.
…Rentvesting could very much be the new Australian dream for generations wanting to get their foot on the ladder.
If you want to start your very own High performance Property portfolio, fill in our 15 Second Application and let’s go on this journey, together.