Many investors are now choosing to buy investment properties and rent where they want to live, rather than going down the traditional route of buying a home and living in it as their primary residence.
Known as rentvesting, this strategy has become increasingly popular in the last few years, as it offers a number of advantages that traditional homeownership simply can’t.
According to the recent PIPA Annual Investor Sentiment Survey, 45% of property investors would consider rentvesting as part of their investment strategy.
Rentvesting is the practice of using the rental income from an investment property to help fund your lifestyle while renting where you want to live. It allows for flexibility and freedom when it comes to both investing and living, and has become a popular option for investors who are just starting out or don’t have the funds to purchase a property outright.
The main advantage of rentvesting is that it enables people to take advantage of the growth potential offered by investment properties while still having the flexibility to live close to their desired location. This means investors can access better rental returns and capital growth than they could by buying in the same area as their primary residence.
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When it comes to tax savings, owning an investment property can be a smart move. While expenses for your own home aren’t tax-deductible, those for your investment property often are. If your property is negatively geared, meaning the expenses exceed the income from leasing it out, you can claim that loss against your other income.
Additionally, you can claim depreciation of new properties over time, as well as the cost of renovations and new appliances. Deductible expenses for your investment property such as interest on your mortgage, council rates, strata fees, property management fees, and repairs can all add up and greatly reduce your taxable income.
With the right approach and a commitment to research, rentvesting can be a viable strategy that offers many advantages.
Ideally, you should purchase the most affordable and desirable (in terms of rental yield) property in growth corridors. You should consider developments that are close to major hubs, public transport links, and other amenities. This helps ensure that your properties will remain attractive to tenants and increase in value over time.
Typically, a good ROI for rental property falls between 4% to 10%. This means that for every dollar invested, you can expect to earn a return of at least 4 cents per year. This range takes into account different factors such as location, market demand, and property condition. By aiming for a rate of return within this range, you can ensure that you’re making a solid investment that will yield profitable returns in the long term.
Rentvesting offers an attractive way to diversify your investment portfolio while still being able to enjoy the lifestyle benefits of living in your own home. By leveraging the equity of each property you purchase, you can increase your returns over time. It’s important to remember that ROI varies depending on factors such as location and type of property, so it’s essential to do your research before investing.
Ironfish offers a revolutionary suite of services designed to make investing easier than ever. Our research team offers data-driven insights to power investments, while our seminars and events help people learn more about investment concepts, strategies, and lending. Ironfish provides exclusive access to some of the most iconic residential real estate around, including apartments, townhouses, houses, and land all across Australia -allowing investors to feel confident that their investments are in the right places.
At Ironfish, our team of experienced property strategists can help run some calculations suited to you to find out whether or not rentvesting is an optimal investment strategy for your unique circumstances. Whether you are interested in buying your first property, investing in your dream home, or expanding your rental portfolio, we can help you find the right path to start building wealth through bricks and mortar. Book a discovery session with one of our property strategists today and discover your path to long-term investment success.
Want to find out how you could build your property portfolio? Our property strategists are here to help.