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Is rentvesting right for you?

The Great Australian Dream of home ownership is still alive, but it’s evolving.

With rising costs of living and higher interest rates, rentvesting has become an increasingly popular strategy for getting a leg up on the property ladder.

Reinvesting is when you rent where you want to live and buy where you can afford.

Here are some things you should consider before deciding whether rentvesting is right for you.

The pros of rentvesting

Rentvesting can offer both flexibility and financial security. Here are some of the advantages of rentvesting:

  • A leg up on the property ladder: Rentvesting allows you to get started in the property market with a smaller deposit and work towards buying the home you want.

  • Lifestyle perks: Want to live in a trendy neighbourhood that’s out of your price range? With rentvesting, you could live the lifestyle you want and invest elsewhere.

  • Flexibility: Renting gives you increased flexibility to move around if your circumstances change.

  • Tax benefits: What can be great about owning an investment property are the tax perks. Many of the property expenses can be offset against your income.

The cons of rentvesting

Rentvesting isn’t necessarily a good option for everyone. Here are some of the disadvantages:

  • No First Home Owners’ Grant (FHOG): If you decide to buy an investment property rather than a home, you won’t be entitled to either the FHOG or stamp duty exemptions or concessions for that property. These are for first time owner-occupiers.

  • Added responsibility: Being a renter and a landlord at the same time means you’ll have multiple expenses to cover. In addition to paying your rent, you’ll have costs including council rates, property management fees, maintenance, landlord insurance, as well as your mortgage repayments.

  • You won’t own your home: Renting means you don’t have control over how long you can stay in your property which means you may end up moving on a regular basis.

  • Capital Gains Tax: If your investment goes up in value, you may be subject to Capital Gains Tax when you decide to sell.

Where to buy?

New analysis from Property Investment Professionals of Australia (PIPA) has identified the top five areas to rentvest in 2022:

  1. Casey City Council (Melbourne)

  2. Moreton Bay Regional Council (Brisbane)

  3. City of Onkaparinga (Adelaide)

  4. City of Sterling (Perth)

  5. Penrith City Council (Sydney)

But with any property search, it’s important to do your research on things like capital growth potential and rental yield.

Like to know more?

If you think rentvesting could be right for you, speak to us and we’ll help you to explore the finance options to suit your needs.

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