It’s no secret that the property market is unaffordable in large cities such as Sydney, where employment opportunities, culture and amenity attract more people to the centre each year. The growing population keeps both housing demand and housing prices sky high.
This is where rentvesting provides a solution. You get to live in a central location and pay rent, which is much less than the cost of a mortgage in the same location. You can be close to work and good schools for the kids, but you also don’t have to miss out on investing in property.
Positives of Rentvesting
There are so many positives to rentvesting. Buying in a more affordable location, means you spend less time saving a deposit. Growing regional areas can have some fantastic capital growth opportunities, which you don’t want to miss out on. You can choose to renovate your investment whilst not living there, which is much more convenient. Lastly, you can buy more properties for a balanced and diversified portfolio.
Negatives of Rentvesting
The only real negative to rentvesting is that you won’t get to take advantage of the stamp duty concession or capital gains tax exemption. However, what you lose in tax, you will make up in capital gains. So not really much of a negative to stop you from rentvesting!
Here are 3 easy steps to becoming a rentvester:
- Step 1 – Raise your deposit
You might own your property currently and have some equity, or you may need to save and scrounge to get some cash together for your deposit. Either way, 5% of $400,000 is much better than 5% of $1,000,000. Not only will you save quicker to buy a cheaper property, but this means getting into the property market sooner to take advantage of long-term capital growth.
2. 2. Step 2 – Research markets
Don’t forget to do your research or you could make some costly mistakes. Buying a bad investment can set you back financially for years. Rentvesting is a great strategy, but only if you make the right investments. Rentvesting works best when the property you buy is located in a growing affordable location. It works even better, if your investment property is positively geared to help pay the rent at your central location.
3. Step 3 – Purchase and repeat
After you have purchased your investment property, make sure you hire a good property manager. They will be your eyes and ears, whilst you do not live locally to your investment. Your manager will maximise your return on investment, by making sure you have the best tenants who are paying market rent and by looking after your property maintenance, to preserve the property value. Once everything is going well, you can do it all again. At this stage you are a true rentvester – you are growing your property portfolio, without ever having to move away from your good central location.
At JR Prosperity Partners, we believe property investment is the best way to increase wealth and obtain financial freedom. Let us help you grow your property portfolio to support your rentvesting property strategy. Contact us today on 1300 522 562.
