Rent-vesting is a strategy where someone rents where they live and buy’s an investment property. I’m personally a big fan and something I continue to do even after purchasing 7 for investment purposes.
It allows you to live where you want to live and invest where you want to invest. Instead of compensating on investment qualities to make way for home preferences and going without things you want in a home so you can buy a half decent investment property. Rent-vesting gives you the best of the best. Rent a home that offer everything you desire and purchase an investment that ticks all your criteria.
Buying a home can significantly reduce your borrowing capacity. It’s a debt that comes with expenses like rates, insurance etc and doesn’t produce an income. Renting can impact your situation less, allowing you to afford more expensive property or roll onto the next one sooner.
For me it was cheaper to rent than own and I’m able to maintain higher levels of savings, but it can be just as useful on the other end of the spectrum, for example living in an expensive apartment when you would rather not invest in apartments.
Things to consider:
You’ll likely make yourself ineligible for first home buyer incentives. For me this was an easy decision. Just ask yourself if the property you're buying can outperform a home by more than Whatever grants and incentives are available at that time.
There’s never been a better time to be a tenant. In terms of laws and rights that favour tenants. It appears that this
Owning your own home can have more value to some people than the financial advantage of rent-vesting.
Investment properties have tax benefits as expenses like interest on the loan, insurance and repairs are deductible. The same costs on a home you own aren’t tax deductible. (Speak to a qualified accountant)
Live in PPOR flips are another great strategy to consider if you’re considering beneficial ways to maximise returns on a property you purchase for yourself.
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