As the number of Australian residents wanting to enter the property market or continuing to grow their property investment portfolio continues to grow, it’s interesting to look at the benefits and motivations of designing a rentvesting lifestyle. As a property investor, rentvesting can be an excellent way for you to be in the property market while renting the property you live in. Below, we look at some of the factors that have contributed to the rise of rentvesting in Australia.
Increased lifestyle choices
Rentvestors can live closer to the city or in desirable coastal areas with more employment opportunities where renting is more affordable than being an owner-occupier with mortgage repayments. We see a growing number of younger investors choosing to live in the vibrancy of the city while investing in more affordable areas further out from the city. Their focus is generally on the capital growth of those areas as well as strong yield.
Shifts in generational behaviour
As young Australians seek higher-quality properties in sought after areas, as soon as they move out of the family home, renting in these areas gives younger investors instant access to amenities and lifestyle.
Increased flexibility
Rentvesting is keeping Australians flexible with their living arrangements, giving them the ability to quickly pursue new opportunities as they arise without the hassle of having to sell their primary place of residence. When you live in a rental property, you can give notice to your property manager and pursue that dream job in a new city or move abroad while knowing you’re still investing for the future with your investment property.
Tax deductions and expenses for the investment property
Rentvestors can claim deductions and expenses such as property management fees, interest on a loan, council rates, insurance, repairs and maintenance and depreciation. If they run a business from that property they can also claim a portion of the rent as a tax deduction. Always seek the correct advice from your tax agent for this.
With these factors in mind, along with the potential for net positive cash flow from investment properties, it’s easy to see why people are purchasing a property in an area with the potential for future capital growth while enjoying the amenities and freedom of renting in an area of their choice.
Before considering a rentvesting lifestyle, it’s also important to consider potential downsides such as capital gains tax implications when you decide to sell the investment property. As a renter, you may not enjoy having to move if your landlord decides to sell the property, plus potential renovations and upgrades are limited by your landlord’s appetite for improvements.
With any investment it’s always advisable to get some expert advice before buying, location and your knowledge of any upcoming changes or upgrades to your suburbs of choice is vital to ensure long term capital growth.
If you’re considering rentvesting, you’ll need to consider if these possible downsides outweigh the potential that comes with building an investment portfolio while living in a desirable location.
