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Should you consider Rentvesting?

, by Cindy Knight

Should you consider Rentvesting?

Rentvesting has increased in its popularity in recent times in Australia, especially as housing affordability seems to have been a challenge with first-home buyers. With today’s property prices in Western Australia at a 21.4% lower than its peak in 2014 (CoreLogic), many are considering whether to purchase their own home or to continue renting while investing in another property.

Rentvesting is owning an investment property while renting where you live. The trend in rent-vesting is steadily increasing in Australia. This is especially attractive to those who cannot yet afford to buy in the area where they live but would like to enjoy the lifestyle it offers while securing a foothold in the property market.

The Benefits of Rentvesting:

  • It is a great stepping stone to owning the property you want as it buys you time to gather your savings.
  • You can afford to live in an area that is of a higher living standard without having to make a large financial commitment upfront.
  • You can make your investment decision based on logic instead of emotion.
  • You can retain your existing property without the pressure of needing to sell in order to purchase a long-term home.
  • You can buy time by using the “sample before purchase” approach. You get to try out the neighbourhood first and understand its intricacies while your money continues to grow in an income-producing asset investment.

Whilst all these benefits seem to make good sense, the survey indicates that most home purchases are emotive rather than the rational base. Therefore, there are important considerations to make before you jump into this property strategy.

Key Points to Consider before Rentvesting:

The Great Australian Dream still lives on in the heart of this nation – owning one’s own house (and preferably with a pool to enjoy our beautiful weather!). So, property ownership is still the preferred way forward and owning a family home has certain advantages. Here are some questions that you should consider rentvesting:

  • Have you done your numbers? Being a first-time rentvestor may disqualify you from the benefits of the first home-ownership grant (FHOG) and savings from stamp duty from the government.
  • Is owning a home part of your retirement strategy? A principal place of residence is the only asset that is capital gains tax-free (provided the criteria are met). This is used as a retirement strategy by many, where the asset is sold and downsizing takes place using also the recent superannuation incentive by the government for those 65 years old and above.
  • Do you enjoy the security of owning in the long term? If you enjoy the security of not having to move should the Owner want the property back, this could be undue stress to you? Moving is a major hassle and cost when you have a family.
  • Do you enjoy building and renovating your home just the way you like it? From having your dream garden, a pool (or not having one), designer fixtures, personal touches – this can be the difference in making a house a home.

Which Option is Right?

At the end of the day, the option that is right is the one that suits you best. This is a personal choice – just as your circumstance, goals, aspiration, and personality is different, so should your property strategy be unique. 

As Property Managers in WA for over 65 years, we have come to understand and appreciate the uniqueness of each of our clients and we respect that what is good for one, may not be suitable for another.  We also know that whatever your property strategy may be right now, it is possible to be susceptible to changes over time, both by extrinsic and intrinsic influences.

What is most important is that you have a plan: ask the right questions, know yourself, your goals, consider your circumstances and the robustness of your plan as well as how sensitive it is to changes and choose the right property strategy for you. And If you need any advice along the way, we would love to share our experiences to help you.

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