Rentvesting: An Alternative Strategy for First Home Buyers

Rentvesting: An Alternative Strategy for First Home Buyers

For many Aussie first home buyers, entering the property market with a fresh face is becoming exceedingly difficult by the day. Seeking alternative strategies for first home buyers and other keen investors has become a necessity to achieve their dreams. One of these strategies that I am familiar with, as a senior mortgage broker is Rentvesting.

When most people hear the word “rent”, they don’t tend to associate this term with homeownership or personal capital investment. So, what even is “Rentvesting”? Rentvesting is a home-owning strategy where you pay rent for the property you live full time in, whilst owning an investment property on the side. This investment property, owned by the rentvester, can be also rented out to cover the costs of the mortgage repayments. In some cases, this investment property can turn a profit, helping cover a portion of the costs of renting.

This strategy is a great way to live where you want, whilst breaking into the highly competitive property market! But like all things, there are pros and cons, and I will take you through them in this article.

The Pros of Rentvesting:

  • Live in Your Location Choice: As a rentvestor, it can be more affordable and financially sustainable to rent cheaply in a convenient location, while owning and renting an investment property in a high price area.
  • Decreased Maintenance Costs: Being a tenant of a rental property often has the privilege of the landlord being responsible for the general maintenance costs. Wear and tear on a property is inevitable, not having to organise and pay for it is a bonus.
  • Potential Tax Benefits: Owning an investment property can come with tax deductions, that may be available to you. You can check the Australian Taxation Office website to see these claim types.
  • Rental Income: As mentioned, rental income from leasing your investment property can help supplement the cost of your own rent.

The Cons of Rentvesting:

  • Less Secure Primary Residence: As comes with the territory, renting is technically less secure than owning your own property, your landlord may decide to change tenants, schedule inspections, or raise your rent.
  • Homeownership Costs: Much like the landlord of the place you are renting is responsible for maintenance cost, you would also be responsible for the costs of your investment. Also, if you are not making a return on the rent of your investment property, you may need to pay the difference on top of the rent you are already paying.
  • Zero eligibility for the First Home Owners Grant: Rentvestors cannot access the First Home Owners Grant. This grant is generally available for certain first-time, new home buyers who will occupy their property for the first year. Your ability to access this grant does depend on the state or territory.
  • Potential Capital Loss: There is always the potential for capital loss with investment properties. This is not unique to Rentvesting, but it is something to be mindful of.

How Do I decide?

While there are a decent number of pros and cons to Rentvesting, the best thing you can do is seek professional guidance from a mortgage broker. When it comes to property investment, regarding any strategy, buying now is always the best course of action to consider. So, if you are renting and still want to invest in property as a first home buyer, this strategy is one of the better ones to implement. I believe that Rentvesting is one of the best and easiest ways to get into the property market now, don’t wait for a unicorn!

Join us for a free exclusive webinar on the 12th June where I’ll delve into Rentvesting and how to set yourself up for success:

  • Map out your goals and put a plan in place to achieve them.
  • Why a low interest rate isn’t the only factor to consider.
  • Decode real estate jargon.
  • Ace negotations.
  • Maximise your Rentvesting returns and ensure you’re saving money now, and for the life of the loan.

Register here or by clicking on the image below:

At Vision, mortgage brokers, like myself, are here to guide and empower you to make informed financial decisions throughout your property journey. Our dedicated team is committed to providing expert advice to ensure your success, both now and in the future. Contact us today to get started on achieving your homeownership goals.

Robyn Oberg

Robyn Oberg is a Senior Mortgage Broker at Vision Property & Finance Newcastle, With over 12 years of invaluable experience in the lending industry, Robyn specialises in mortgages for both owner-occupied and investment properties, SMSF lending for both residential and commercial properties, and mortgages for self-employed individuals.

M: 0411 933 300
E: robyn.oberg@visionpf.com.au