We know it seems like a strange thing to do renting out a property and then owing that place while paying rent.
However, this marvel of ‘rentvesting’ is becoming more mainstream, driven by a blend of way of life and financial elements.
Why do it?
A prime motivation to “rentvest” is to get a foot in the entryway of the housing market. While 67% of Australian homes are proprietor involved, that figure is well under half for under-35s.
It has become popular for young adults to remain in the family home. They take care of board while paying off a venture property with the assistance of an renter.
Often, ‘rentvestors’ lease homes in appealing areas where they can’t afford to purchase. And then put their resources into a less alluring property, which is in a higher prospect, developing area.
Concurrently, some ‘rentvestors’ choose to instead lease inexpensively while purchasing a higher-esteem property.
Pros and Cons
As attractive as the lifestyle advantages may be, rentvesting likewise needs to work monetarily. At the base, you should have the option to pay your lease and spread any net costs on your venture property.
Over the long term, you additionally need to wind up in a superior monetary situation through rentvesting. So, it’s imperative to thoroughly assess the property market and make an educated decision as to where to purchase your property.
There are likewise various tax issues, both positive and negative, that need to be considered.
- You can claim a tax deduction against your earned income if the outgoings on your investment property (interest payments, council rates, insurance, agent fees, etc.) exceed the rental income, i.e. if the property is negatively geared.
- Rental income in excess of expenses is taxable at your marginal tax rate.
- Rent on the property you live in needs to be paid from after-tax income.
- Any profit on the sale of a rental property is subject to capital gains tax, whereas the profit on a principal residence is tax-free.
Is it right for you?
Do you like taking in the sea views from your rented home while an inhabitant is taking care of the home loan on your venture jewel in a rural area set to blast?
It’s certainly worth investigating. Call us today, to find out if this is right for you.