Rentvesting: The good the bad the ugly!
Rentvesting is purchasing an investment property that may be in another state or city to allow you to enter the market while you rent where you want to and where you can afford.
Pros
Enter the Market Sooner
If you live in an area that has seen a huge amount of growth in recent years, you may find you are priced out of purchasing where you currently reside. Rent vesting gives you the flexibility to look at markets nationwide. Therefore, you can select an area that may be in your budget now and not have to continue saving where the market could continue to increase, continuously pricing you out of the market.
Tax Benefits
Due to purchasing an investment property, opposed to an owner-occupied property, you should be able to claim your associated costs that you wouldn’t have been able to claim if you purchased an owner-occupied property. You should be able to claim things such as your maintenance costs, interest on the investment loan and gain depreciation benefits from having your quantity surveyor complete a depreciation schedule.
Increase Your Chances of Selecting an Area Primed for Growth
This creates more opportunity and gives you the option of not being restricted to a small number of suburbs that may not have long term capital growth potential or an area that has already gone through a large growth cycle. This gives you the flexibility to invest nationwide where you can select an area that is primed for growth, while balancing a strong yield. This way you can build wealth without burning a massive hole in your wallet.
Flexibility
This gives you freedom to pack up easily and move interstate, move to a town you have always wanted to live in or even move overseas without having to worry about what to do with your current owner-occupied property. Importantly, investing in property gives you the freedom and choices to make these decisions!
Cons
Capital Gains If You Sell
If you need to sell the property you should consider the capital gains you may need to pay on the investment property. If you purchased an owner-occupied property, capital gains shouldn’t be applicable. We should always invest with the mindset that we will hold an investment property long term however there can be unforeseen personal situations that could result in having to sell a property sooner than expected.
No Access to the First Home Buyers Grants
When purchasing an investment property, you forfeit the first homeowners grant that you could be eligible for if you purchased an owner-occupied property. This could potentially be a substantial amount of around $15,000 to $20,000 or more. Purchasing in areas primed for growth that will outperform over the long term can outweigh this short-term benefit approach.
Dealing With a Landlord and Making the House Your Own
When the property isn’t your own, you don’t have as much flexibility to do what you want with it. You must ask permission to get a pet or to hang a picture on the wall which can be frustrating for some people!
Landlord Decides to Sell
Your landlord could decide to sell the property you are renting, and this would mean having to find a new place unexpectedly. Suddenly, you would have to spend time finding a place to move, then moving itself and incurring the costs of moving, particularly if you hire equipment or removalists.
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