Among the most obvious draws of rentvesting is that it allows you to start moving up the property ladder now, while still having the flexibility that comes with renting.
Owning a rental property can be a great long-term investment that may even help you save for your dream home under the right circumstances.
Here are some of the main draws that have made rentvesting so popular:
The Benefit of Rental Income
The trick to rentvesting lies in finding a suitable property for generating dependable rental income. In other words, you wouldn’t be doing yourself any favors by purchasing the cheapest dump on the market. The only exception, of course, is if you’re a first-rate redeveloper who fully understands what you’re getting into and the costs involved.
Ideally, your investment property should be one that plenty of people would actually want to live in, even if you wouldn’t at the present time. By ensuring that your property is fairly easy to rent out, you can generate a nice flow of income from the monthly rental payments.
Depending on how much rent you’re able to charge, you can use the payments for partial or full monthly principal and interest repayments on the property.
Potential Tax Benefits
Another bonus of rentvesting can come in the form of tax benefits that you may be able to claim on certain investment property expenses. The interest charged on an investment loan, insurance, advertising, and even depreciation costs, are all examples of expenses that are commonly tax-deductible.
That said, it’s important to seek advice from a professional to fully understand exactly which aspects of your investment property you’ll have to pay tax on and which may qualify for a tax deduction.
Potential Capital Gains
The hope with any investment is that it will go up in value over time. Rentvesting is a way to buy into the property market now instead of waiting for the day to arrive when you can afford to buy your dream home. By selecting an investment property in the right area, you may be able to sell it for a profit down the line if its value increases.
Ultimately, you might even decide to live on the property yourself. You could even continue to draw rental income by choosing to rent out certain rooms at the same time. In that case, it would become an owner-occupied property, which can turn out to be a great situation for the right landlord and tenants.
Continue Enjoying the Perks for Renting
While you may not have enough borrowing power to purchase a home in Sydney or Melbourne, rentvesting allows you to continue to live in the city of your choice, all while enjoying rental income from your investment property.
Aside from presenting you with the opportunity to build wealth, rentvesting also allows you to continue enjoying the benefits of renting the home where you currently live.
Renter’s perks include things like letting your landlord take care of maintenance and repair costs, the fun of living in the inner city without the high mortgage costs, and the ability to move whenever you want without having to worry about paying capital gains tax.
The Benefits of an Offset Account
An offset account is also a potential benefit you may be able to reap the rewards of as a property investor. Offset accounts are bank accounts that can be linked to investment or home loans. While they don’t earn interest like a savings account, the bank will take your current balance into consideration when calculating your interest.
If your financial situation allows you to park extra money in your offset account, you could end up saving on interest and pay off your investment or home loan faster.