Rentvesting: What Is It? Can It Pay Off?
Rentvesting is an arrangement where you rent a home to live in yourself, but buy a property elsewhere and rent it out.
Rentvesting has received a lot of attention in Australia, New Zealand and the USA in recent years. Here we’ll look at whether it might work for you.
The pros of rentvesting
Rentvesting might appeal to people who live and work in one area but don’t want to actually buy a home there.
It might also suit people who currently can’t afford to buy a home in the place where they live.
This kind of arrangement allows you to get a foot on the property ladder now, even if it’s not the property you live in yourself.
Rentvesting offers flexibility as you can move and live wherever you like without buying and selling every time.
It can also be a way of saving and building wealth if property prices rise in the future.
Depending on how the numbers stack up, you might even be able to show a surplus on your rental property. You could put this towards paying your own rent.
The cons of rentvesting
Rentvesters must adhere to all the legal and other responsibilities that being a landlord involves. (Although you can make things easier by using a letting agent to manage your property.)
It’s also worth knowing that buy-to-let mortgages can be more expensive than standard residential mortgages.
There may be tax implications, too. You’ll need to pay tax on any rental profits. There may be Capital Gains Tax to pay on any gain you make if you sell your rental property.
Things you need to consider before rentvesting
- Where do you want to buy a rental property? You can buy anywhere you like, but rentvesting may work best in areas where property prices are lower and rental returns are good.
- How much will a rental property in that location cost to buy?
- How much will the monthly mortgage repayments be? What are the running costs likely to be?
- How much monthly rent might your property earn?
Do your research, check everything carefully and then do the numbers.
It may also be worth getting professional advice from an accountant or tax adviser.
If you’re thinking of rentvesting, and you’d like to know how our letting and management services can help, call or message us.
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