Investing while renting – risky or genius?

April 6, 2021

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By Rentvesting Admin

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Investing while renting – risky or genius?
Posted on Tuesday, April 6th, 2021

For those eager to get into the market, it might feel like the pressure is on to settle down in a permanent home before you can start investing. You want the security, a safe space and a place to call your own, on top of assets that bring in money. But do you want the repayments and the other risks that come with owning two houses?

You could rent and invest – aka rentvesting – instead. But choose to lease is just dead money, isn’t it? Actually, it’s not.

Why renting isn’t dead money after all

This is a great option for those that want to move out of home, prefer to live with roommates, or need to be closer to work, school etc.

In fact, it’s a fantastic way to get ahead in the market, especially whilst trying to build an investment portfolio for yourself. Check out our guide on the benefits of doing this, and how it may actually put you in a better position to buy.

But what are the pros and cons of buying whilst taking out a lease, all before you even purchase your first house? First, let’s look more into what it all means.

What is rentvesting?

Here’s how we sum it up. This fundamentally refers to the process where you can continue paying your weekly sum (with fewer fees, closer to your commitments, move when you wish), whilst using the money you save by not owning a house to invest at the same time.

You get to live in your chosen location, while using the difference between what it may cost to own a property (your mortgage repayments) and what you are paying on a lease (which should be cheaper), versus what you are paying in the mortgage.

It’s a strategy that has been working successfully for a while now, with current market conditions making this strategy even more viable for the everyday Australian. Our team can show you how to make this work for you, too, and help get your foot in the door.

This set-up is constantly evolving and reinventing itself

This kind of set-up is changing our way of life as we constantly assess and rethink our needs while we grow with the evolving market. It gives you the flexibility to pursue what you enjoy. Our free eBook explains how this can be achieved.

It’s also a way that can allow you to maintain a lifestyle and grow an asset base across property, shares or a particular commercial venture with the money that you can afford. Here are some other pros:

It provides a cashflow

Those who lease out their asset can receive an income from tenants, meaning that mortgage repayment shrinks. The tenants are supporting the mortgage payments on that property while it begins to appreciate.

You can reap the tax benefits

With a tenant living at your property, you may be able to deduct associated fees. Some of these may include:

  • Advertising to find new tenants
  • Bank fees and interest (negative gearing)
  • Cleaning and Strata fees
  • Insurances
  • Legal expenses and land tax
  • Repairs and maintenance

You can look at it as future security

Imagine you’re in love with the houses in the suburbs a few kilometres across town, but it’s not the right time to live it in.

Instead, you could buy a house there, then lease it to tenants who can live in it right away and can start helping you chip away at the mortgage. Then, when the time is right, you can move in yourself with a big dent already taken out of the repayments!

Sound good? For more information, contact one of our expert advisors today for advice on starting your own portfolio.

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