What is rentvesting?

The “great Australian dream” of owning a property can be a little harder to come by these days. With the average age of first home buyers becoming older1, more and more Australians are looking to alternate purchasing methods, like rentvesting.

What is rentvesting?

Rentvesting is essentially renting in an area you would want to buy in, and at the same time, purchasing a home where you can afford to.

Why rentvest?

The main aim of rentvesting is to ideally rent out your purchased property to cover your own rental payments and eventually sell, in order to make a profit for capital gain. This concept allows the buyer to have the lifestyle they want now, whilst at the same time, building much-needed equity.

Let’s look at a few pros and cons to this approach.

Pros

Getting your foot in the door

Rentvesting allows you to enter the housing market at an earlier stage, rather than potentially waiting years to save for a larger deposit.

Location, Location

Renting in your preferred location lets you have the lifestyle you want. You’re free to cater to yourself and/or your family’s needs, work and other requirements.

Freedom

Renting can prevent the feeling of being tied down. Rentvesting allows you to move around, not being fixed to one location. This is particularly handy for those wanting to travel.

Cons

Instability

Although living in your dream location may have its advantages, renting is not always secure. You could be asked to move out at any time! This can be especially difficult if you’ve grown to love your home.

Further to this, leasing a property for 12 months at a time can be difficult for those who need more stability in their life, especially couples with a family.

Restrictions

Because you don’t own your home, you can’t make it your own. Forget about painting the walls, hanging up photos and completing your own DIY projects, it’s not yours to meddle with.

Dead Money

The age old saying “rent money is dead money” can come into play. Some home buyers believe that renting in no way benefits the renter, as you’re essentially paying off someone else’s mortgage and taking no positive steps forward to building your own portfolio.

Whether you decide to rentvest or purchase right away, ALI could help you with our Loan Protection Plan. We have over 4,000 mortgage brokers nationwide authorised to offer our mortgage protection insurance that provides you with three types of benefits, that could help you meet your mortgage repayments in the event you lost your job, suffered a serious injury or illness, or even died. Speak with your local mortgage broker or request a quote here today.

 

1. https://www.smh.com.au/money/borrowing/older-first-time-home-buyers-face-barriers-20180405-p4z7vp.html

Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.

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