RentVesting – What is it and why has it become so popular?
May 29, 2017
What is RentVesting?
RentVesting is where a person acts as a Landlord and a Tenant – by renting out a property they have purchased, and simultaneously paying rent for the place they are living in. There are two main categories people fall into when RentVesting – the ‘accidental’ and the ‘strategic’.
The Accidental RentVester
Some home owners have accidentally become RentVesters when they have had a job transfer interstate and, instead of selling up, have decided to rent interstate and rent out their home at the same time. This allows them to avoid the huge costs involved in buying a selling, and allows them to return to their home when the contract finishes.
The Strategic Rentvester
Strategic RentVesters treat property as an asset class being bought by their investment 'business'. They do not allow themselves to be emotional about owning property.
Strategic RentVesting is very popular with the savvy Millennials. They tend to be more 'mobile' with their jobs and have with job location or contract changes more frequently in their more executive upscaling careers that more often involve moving interstate or even overseas for a better or new job. In their case, it can make a lot more sense to rent rather than feel locked down where they bought a 'home' to live in.
How popular is it and why?
RentVesting has grown in popularity - statistics from Mortgage Choice 2016 claim that 30% of investors are RentVesters. Many of you may think that RentVesting would never be suitable for you, however, it has become very popular for some very good reasons.
Many people are attracted to RentVesting, or need to do it, as the best way to buy and pay down the property loan or as a way of commencing and then building a property portfolio while they rent elsewhere.
Another factor is the much talked about "affordability". It can ultimately cost less in after-tax out of pocket money per week to own a property of the same value through RentVesting than to buy the same value property as an owner occupier. The RentVested property can achieve significant annual tax savings that they could not have gained if they lived in the property.
What about the rent that they are paying, isn’t that dead money? Not really. For example, if they are paying $400pw in rent, and receiving $400pw in rent from the investment property that they bought; then they cancel out at first glance. The savings are seen when you take into account the tax deductions on bank loan interest, rental income losses and other expenses and depreciation benefits that come along with an investment property. None of these savings would have been available through the old ‘buy, live and pay off a home’ model.
If RentVesting is so good shouldn’t everybody, do it?
If done well it can allow someone to use the tax savings to pay down the loan faster or invest elsewhere. That is in addition to the previously mentioned job mobility advantage and savings in selling costs (agent's selling fees) and Stamp Duty on the next 'home' purchase. However, RentVesting will not be right for everyone – it comes down to the specific financials and scenario of the person, couple or family considering it.
To gain a proper understanding of how RentVesting can apply to YOUR unique position requires the expertise from integrated: tax, financial planning and property research perspectives. We provide these services FREE in our Property Investment Discovery Program. Getting the right advice as early as possible allows for pre-planning to maximise benefits and find out how property investing can benefit your financial future.
PROPERTY INVESTMENT DISCOVERY PROGRAM
ONE: Enrol in the FREE Property Investment Discovery Program by filling in the form below.
TWO: We will allocate you a time slot to visit Michelle Roberts,
whom will help you determine the best property investment strategy for you. Our
tax professionals will also look over your situation to ensure a good fit.
THREE: If you are to proceed to step three, we will brief our
Property Researcher Andrew Gabriel, in relation to your investment needs. We
will make a time for you to meet with Andrew, and he will use his extensive
network to locate a property that precisely matches your optimum investment strategy.
- STEP FOUR: Once a property has been selected by you and Andrew, you are free to proceed with the purchase with the comfort of knowing that you are purchasing a property that precisely matches your overall financial and taxation strategy.
We have helped hundreds of clients build wealth through this program.
Investment Property Researcher
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This information in this article is for general discussion purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any decision of a financial nature you should seek advice from a qualified and registered financial, tax and legal adviser. No material contained within this article should be construed or relied upon as providing recommendations in relation to any financial products or assets or to make any decision. All readers should make independent inquiries to satisfy themselves of the accuracy and suitability of the information to their personal position. No liability is accepted for decisions made using any views in the article. All Content is provided "as is"and without warranties of any kind, either express or implied. Andrew Gabriel is an independent Property Researcher. The views expressed in this article are the views of the author, and do not necessarily reflect the views and opinions of BCV Financial Solutions.