The pros and cons of ‘rentvesting’

You may have heard quite a bit about the concept of ‘rentvesting’ in recent years, as it has become quite popular among some property investors in Australia. But you may be wondering two things about this new trend: What is it, and would it be right for you?

Simply put, rentvesting involves buying a property in a place you can afford (typically rural or suburban areas), while still living in a rented home in a more expensive region (such as major cities), according to realestate.com.au. Typically, the cost to buy in the latter is prohibitive, but renting there is relatively affordable, whereas there can be tremendous monthly savings in paying a mortgage in less in-demand markets.

As with any real estate investment decision, there may be pluses and minuses, including the following:

The pros

Putting the difference between rental and ownership costs in major cities into paying for a property farther out from the downtown core gives you a lot of flexibility in your lifestyle. Don’t worry about long commutes, and just keep living the lifestyle you want.

It also gives you some financial flexibility, Finder notes. Buying a home isn’t cheap, but if you rent it out, you can cover your annual ownership costs and, later, sell it for a profit that allows you to move up into a home closer to the one that meets your goals. Eventually, you may even decide you want to move into that home yourself.

The cons

On the other hand, some of the negatives that come with rentvesting revolve around the fact that you’ve bought a home – often a big part of the classic “Australian dream” – but you’re not going to live there and won’t be able to make it your own. At least, not at first.

In addition, you may face more homeownership costs than you realise, or have a responsibility to manage that property for the tenant, which can add some hassle to your life. Moreover, just like any investment property situation, you may face times when the property sits vacant, potentially increasing your financial risk.

Want to know more about rentvesting or the housing market in general? Reach out to the experts at Ray White Surfers Paradise today. We can walk you through all the options that work best for your unique needs and financial situation, helping you find the just-right solution you’re looking for.