Rentvesting: Building an Investment Property To Rent
What Is Rentvesting?
At its core, rentvesting is an innovative strategy where you, as an investor, build or buy a property in a financially attainable area and rent it out while continuing to live as a tenant in a location that suits your lifestyle or career needs. This approach is gaining traction, particularly among first-time buyers who find themselves priced out of the housing market in major cities.
Building an Investment Property
Building an investment property as part of your rentvesting strategy offers unique advantages. Simonds Homes specialises in constructing properties that are not only perfect for renting out but also assist with long-term capital growth. This approach brings several advantages:
Tailored Investment: Building allows for creating a property that aligns perfectly with market demands in design, size, and amenities.
Financial Gains: New properties tend to attract better rental yields and can have a higher potential for capital growth.
Loan and Financing Options: Many investors leverage investment loans tailored for construction, which may offer more favourable terms than traditional mortgages. Understanding these financial products is crucial in maximising investment returns.
Government Grants and Incentives: Various states in Australia offer grants and incentives for new property constructions, which can significantly reduce initial investment costs.
Types of Properties Suitable for Rentvesting
Focus on suburbs or regions that show signs of growth, as properties in these areas are more likely to appreciate. From there, it is essential to identify the property type that aligns with rental demand in that chosen suburb.
Family Homes: Large homes in family-friendly suburbs are always in demand, making them a solid choice for rentvesting.
Compact Houses and Townhouses: These are ideal for smaller families or couples, offering a blend of space and affordability.
Developments and Estates: Investing in a property within a development or estate can be lucrative, especially if the area is slated for growth.
Pros and Cons of Rentvesting
Pros
Financial Flexibility: Rentvesting allows investors to build equity in a property while living in a location that suits their current lifestyle needs.
Tax Benefits: There are various tax incentives associated with owning an investment property, such as deductions on interest payments, property management fees, and depreciation.
Market Entry: Rentvesting offers a pathway into the property market, especially in areas where buying to live is not financially feasible.
Cons
Dual Responsibilities: Balancing the roles of both a landlord and a tenant can be challenging, requiring careful management of finances and responsibilities.
Market Risks: Like any investment, rentvesting comes with its share of market risks, including property value fluctuations and rental income.
Long-term Planning: Rentvesting requires a long-term strategy and commitment, as the financial benefits are often realised over time.
Rentvesting, focusing on building an investment property, presents an innovative way for Australians to enter the property market. By understanding the financial aspects, choosing the right property type, and carefully weighing the pros and cons, investors can leverage this strategy to build wealth while maintaining their desired lifestyle.
*Please note, any information given to you by Simonds is general information only and will depend on your own personal and financial circumstances. We recommend that you make your own independent enquiries and seek professional advice from a qualified financial planner, bank or broker.