WHY IT’S BETTER TO RENT THE HOME YOU LIVE IN, RATHER THAN BUY IT.
Owning a home was once a cornerstone of the Great Australian Dream but thanks to skyrocketing Sydney property prices, the dream is starting to take a different shape for some Sydney residents. With the median house price hovering around the $1 million mark, breaking into the property market is extremely difficult for many first-time buyers.
This has led to the rise of Rentvesting: which means that instead of buying the property they want, people rent a home and then invest their leftover money into an investment property.
So why’s it better to “rent” the home you want to live in & buy elsewhere?
Let’s say, for example, you want to buy a four-bedroom home in Sydney’s inner west, but the sale prices in the area mean these homes are out of your reach. The Rentvesting solution to the problem would be to rent the ideal four-bedroom house where you want to live, and then buy an investment property in a suburb where prices are more affordable.
Then it’s important to buy an investment property and rent it out to help cover your own rental payments. This strategy lets you have the lifestyle you want now, while at the same time building a property portfolio for the future.
WHY RENT MONEY IS OFTEN DESCRIBED AS “DEAD MONEY”…
Well if you’re not investing in property and just renting it, then it’s dead money. The biggest risk in real estate is not having any. Educated investors know how to make rent money work for them. Your money needs to go into property, but only the right properties, that will grow and go up in value. And where you want to live is not necessarily the best place to put your money. That’s why if you rent where you live it’s not dead money, as long as you have an investment property to balance this out. Even while you’re saving up a deposit for an investment property it’s fine to rent, as long as you do put that money to work in a good investment property. You also want to make sure the first property you buy is a high growth asset. That’s why a carefully selected investment is the best way to go.
IS IT BETTER TO “RENT” OR “BUY” THE HOME YOU WANT TO LIVE IN?
It is better to rent where you want to live without a doubt.
Paying off your home is one of the hardest things you will do in your life, because you do it with just your salary. With an investment property you have 3 streams of income, your salary, your Tax deviations and the tenant. If you want to get ahead this is crucial. The old way of investing in property doesn’t work anymore. Unless you have rich parents, you really must rent where you want to live and buy an investment property in the right location. The right location is an affordable area that has a strong demand but low supply. Somewhere where there is a lack of land that’s in a capital city or large regional centre. Stay away from mining towns or boom towns.
WHAT ARE THE OTHER BENEFITS OF RENTING?
Renting enables financial flexibility, Career flexibility, Low maintenance costs, and No outlay required. A Property I bought in Queensland last year is costing me $11 per week because of my tax deductions and the tenant. If I owned it and lived in it, it would cost me around $800 per week. Other benefits of renting include; Getting tax back every week, getting rental income and those two extra income streams means more cashflow so you can start building your wealth sooner.
HOW SHOULD RENTERS BE REINVESTING THEIR CASH?
They should be investing it in property. Properties double every 10 years or so, so if you bought an investment property for $400k you would have made $400k in ten years. There is no way you could save that amount of money! You can still buy a great investment property for around $50 per week.
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