Rentvesting. At first glance, it seems like a good idea… but what is the downside of rentvesting property in Australia?
With rentvesting, you buy a property where you can afford it, but rent a property to live where it’s most convenient and desirable.
Rentvesting is a strategy that has been growing in Australia (and the USA) over the past couple of years. It’s helping the younger generations get into property investment faster as the average investor age is currently at a record low of 34.
It’s a lifeline for those who are trying to gain a foothold in a property market that’s constantly fluctuating.
Rentvesting Is Shifting the Investment Mindset
In the past, the general thought regarding investing was that you first purchase and own your home BEFORE purchasing any additional properties.
However, in today’s property climate, property values are rapidly outpacing wage growth; this means that every year, those in the market to buy a house have less money available and the prices continue to rise. In the past decade alone, housing prices went up 33% compared with 14% for household incomes, so now you need many more years of saving before you will be able to buy your own house.
Therefore, rentvesting is a strategy that can help people get out of the rat race of being renters their entire life.
As with everything in life, there are pros and cons. We discussed the pros of rentvesting in another article that you can read HERE.
Rentvesting Cons
Here are five reasons why you may want to reconsider if rentvesting is a good option for you.- Less Security in Your Primary Residence. In other words, if the owner wants the property back, you may need to move. The rent could increase, or you may need to make the property available for inspections.
- Homeownership Costs. As a landlord, you may have to bear the costs of repairs to your property. You might also have to pay for closing fees on renting the property as well. Sometimes it may prove difficult to maintain rent payments as well if one chooses to invest in a property and it doesn’t offer enough income. It’s important to have a property investment strategy in place so you know you’re getting the most bang for your buck.
- Tax Liability. If you end up selling your investment property, you’ll need to pay tax on any capital gains. You won’t have to pay capital gain tax on most owner-occupied properties. Connect with one of our licensed property specialists to discuss the tax benefits and liabilities.
- No First-Time Buyer Grants. Rentvestors don’t have surefire access to the First Home Owners Grant (FHOG), which is available for certain first-time, new home buyers who will occupy their property for the first year. These grants vary by state and range from $7,000 to $29,390.
- Potential Capital Loss. If your investment property decreases in value and you have to sell it, you may end up selling it for less than you purchased it. This is why buying the right investment property in a lucrative location is critical.
We Can Help
Ready to start creating passive income with property? Think you’re ready to invest in one or more properties? We can help! At OneCorp, we walk you through every step of the process at NO cost to you. We create a personalized property strategy and help you find the best opportunities on the market so you know you’re getting the best return. Getting started on your investment property journey has never been easier:- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!
