When thinking about ‘when to buy,’ ‘where to buy’ and ‘can I afford it?’, one term that may spring to mind is rentvesting. Rentvesting refers to renting out a property in a desired location while owning an investment property in a more affordable area.
Regarding property strategies, rentvesting can be a good idea for some people, depending on their financial and personal circumstances. On a personal note, before we knew there was a word for it, my wife and I rentvested. Here are five reasons to consider rentvesting as part of your property strategy;
You want to save time and keep costs down: When my wife and I rentvested, one of the most significant benefits was the 20 hours+ a week we saved on commuting. Plus, the cost of transport saved us hundreds of dollars a month in petrol costs. As a father, rentvesting also helped me spend more time with my son and less time commuting. A win-win!
You can net out positively: One thing rentvesting helped us achieve is positive cash flow as our mortgage repayments at the time were less than the rental income we received from renting out our home. It wasn’t much at the time (as we still had a hefty mortgage) however did help fund our date nights.
You’re not ready to settle down: If you’re not sure where you want to live long-term, or you’re not prepared to commit to a particular area, rentvesting could give you the flexibility to move around without being tied to a specific property. Rentvesting for us also gave us the option to ‘try before we buy’ in an area we desired to live in the long term. This solidified our decision to buy there as well, eventually.
You want to build wealth: Rentvesting can be an excellent way to build wealth over time. By owning an investment property, you can build equity and generate rental income, which can help you achieve your financial goals.
You want to diversify your investments: Rentvesting can be a way to diversify your assets beyond the stock market or other traditional investments. You can benefit from capital growth and rental income by investing in property.
However, there are also some downsides to rentvesting that you should consider.
You must juggle mortgage & rental payments: this can strain your finances and mental load, so be across all the outgoings before moving.
You’re a landlord: You must be comfortable with being a landlord and managing a rental property. With a great property manager and tenant, this can be very easy, so do choose wisely.
You can risk being priced out: if your investment property’s capital growth (i.e., the property’s value) is less than where you hope to buy when you settle, you could make it even harder to buy in.
To learn more about whether rentvesting is right for you, contact your property consultant or reach out.