Welcome to Top Tips Tuesday!
This week’s tip is for those that are currently renting, want to get on the property ladder, and have been priced out there of their local market and are not sure what to do. So, there’s a great strategy known as rent vesting.
Rent vesting is a home-owning strategy where you rent a property to live in that’s right for your lifestyle, while you own an investment property that’s right for your budget.
You might be renting a property that’s close to schools or work, or the beaches for lifestyle. But the price of a property in that local area might be outside your borrowing capacity.
You then buy another property in a more affordable suburb as an investment. This gives you the ability to still own real estate, and has many benefits:
1. It gets you on the property ladder
We don’t know what prices are going to do in the future, but we know that when prices do rise, and our borrowing capacity is limited it can really restrict our purchasing options.
2. The tenant pays the mortgage
With the investment property, the tenant is paying the mortgage, which is great.
3. Most property expenses are a tax deduction
A lot of the expenses related to the investment property are a tax deduction. You can claim the interest on the loan, rates, insurance, etc.
4. It allows you to live in a more suitable location
It allows you to live in a location that is more suitable for your family and lifestyle.
5. You can sell the property or use the equity to buy a suitable home
When the property goes up in value, you can use that extra equity to fund the ideal home in your ideal location. Or you could sell that property and use the cash equity to buy the next property.
If you are renting at the moment, the average rent is around $600 per week. That’s $30,000 a year you’re giving to the landlord or $300,000 over the next 10 years, which is massive!
You really need to consider the long-term costs of renting the property.
Sure, there are some expenses, rates, insurance, and taxes with owning an investment property. But the pros definitely outweigh the cons. So, it’s a great strategy, and a lot more younger people are starting to adopt this.
I guess the question would be would I do this myself? Absolutely, yes. I have done it in the past.
I had to sell all my properties and start my portfolio again. And the first thing I did was buy an investment property and rent it out, and I still own it.
If you would like to discuss if this would be a suitable option for you, please reach out. You can book a time in my calendar by clicking here.
Regards,
Geoff Tomkins
Buyers Advocate
PH: 0404 852 781
