Rentvesting is an arrangement where you rent a home to live in yourself, while buying a property elsewhere and letting it out. This strategy has attracted attention in Australia, New Zealand, and the USA in recent years, and now many are asking: could rentvesting work for you?
The Benefits of Rentvesting
Rentvesting may be appealing for those who live and work in a particular location but do not wish to buy a home there. It can also suit those who find property prices too high in their current area.
This approach allows you to step onto the property ladder now, even if it’s not with the property you live in yourself. Rentvesting offers flexibility, enabling you to move and live wherever you like, without the need to buy and sell each time.
It can also be a way to build long-term property investment wealth, particularly if property prices rise. Depending on your calculations, you might even generate a surplus from your buy-to-let property, which could contribute to your own rental costs.
The Drawbacks of Rentvesting
While rentvesting offers advantages, it’s important to consider the responsibilities of becoming a landlord. Managing a rental property comes with legal obligations, though using a letting agent can make the process more manageable.
It’s worth noting that buy-to-let mortgages often carry higher interest rates than standard residential loans. There are also tax considerations to bear in mind. Any rental income will be subject to tax, and you may need to pay Capital Gains Tax on any profit realised if you sell the investment property.
Key Considerations Before Rentvesting
Before committing to rentvesting, consider the following:
- Location: Where do you plan to buy your rental property? While you can invest anywhere, areas with lower property prices and strong rental yields are often more attractive for rentvesting.
- Purchase Costs: How much will it cost to buy a property in your chosen area?
- Financial Planning: What will your monthly mortgage repayments and running costs be?
- Rental Income: What level of rent can you reasonably expect from your buy-to-let property?
It’s essential to conduct thorough research, carefully assess the numbers, and consider obtaining professional advice from a qualified accountant or tax adviser.
How We Can Help
If you’re considering rentvesting and would like to learn more about how our letting and property management services can support your plans, please contact us. Our experienced team is here to help you navigate the complexities of the rental market and ensure your investment journey is a success.
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