It’s possible to break into the property market without sacrificing your lifestyle and reinvesting may be the way forward for you. The popular home-owning strategy is a growing trend, with 60% of respondents in the 2020 PIPA Annual Investor Sentiment Survey indicating they’d consider rentvesting.
If getting into the property market is your goal for 2021, rentvesting might be the pathway to success.
What is rentvesting?
The strategy allows you to rent a property that suits your lifestyle while owning an investment property that suits your budget. This means you experience the best of both worlds. Live where you want to and make your money work for you by renting the investment property out.
The benefits of rentvesting
The sooner you get into the market the better and rentvesting offers a foot in the door.
The primary benefit of rentvesting is keeping your lifestyle location while entering the property market in a more affordable area. For example, buying in Sydney may cost upwards of $1 million, while a larger house in a booming regional area might be $600,000. Renting out the regional property helps cover ownership costs. On a profit-earning investment, you can cover your own rental costs and create passive income.
The sooner you get into the market the better and rentvesting offers a foot in the door. You can use the equity from your first investment to purchase another and start generating capital gains. With two properties gaining equity, you’ll have two sets of tenants paying your mortgages and better tax advantages.
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Potential tax benefits* include claiming some of your investment property expenses as tax deductions, such as insurance, depreciation and the interest paid on your loan. In terms of capital gains, you could sell your investment property for a profit if it increases in value in the future.
Research and expert advice are keys to rentvesting success
When you don’t need to consider your personal preferences in buying property, the scope is much wider for entering the market and building a property portfolio. Research is therefore focused on locations with capital growth potential and affordability.
As a first step, you need a strategy to evaluate your current position and develop a framework for success. A team of qualified and experienced people help you discover if rentvesting is right for you, along with steering you through the process. This is the successful approach Mel and Chad Holmes took upon meeting with DPN.
Like many Australians, Mel and Chad shared the dream of buying a home they wanted to live in. They became disenchanted with the dilapidated houses selling for almost a million in Sydney’s Sutherland Shire. Their budget couldn’t stretch to repair works, let alone renovations.
Upon meeting with DPN to get pre-approval for a home loan, one of the DPN Directors suggested rentvesting as an alternative way into the market. After a thorough investigation of the couple’s financial position, borrowing capacity and future plans, a strategy was implemented to enter the market in growth areas with two house and land packages for dual income homes.
With brand new properties built and rented out, their investment journey has them on track to financial success. If you think rentvesting might be the right strategy for you, the team at DPN are happy to answer your questions.
*The Australian Tax Office can advise which claims apply to your situation.
This information is provided by DPN Pty Ltd ABN: 94 630 700 186 Australian Credit Licence 514759. DPN Finance Pty Ltd is an authorised credit representative 504129 and related entity of DPN. Credit for Dream Big 100% Offset and Work Smart 100% Offset is provided by Adelaide Bank a division of Bendigo and Adelaide Bank Ltd, ABN 11 068 049 178 and Australian Credit Licence 237879. Casa Capace Operations Pty Ltd, NDIS provider number 4050038018 trading as Casa Capace.