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Current Property Market Trend: Rentvesting

Writer's picture: RebeccaRebecca
rentvesting

Due to rising interest rates and high prices of properties, many Australians are getting creative when it comes to penetrating the property market. They’re turning to rentvesting instead of taking out a big mortgage to buy their dream home in their dream location. 


But what is rentvesting? 

Simply put, you purchase a house or apartment to rent out while still living in your dream house in your dream location. A trend in the Australian property market getting more popular these days, rentvesting has seen a growth of 15% in tenants who are now rentvestors as stated by the Australian Bureau of Statistics


Current Property Market Trend: Rentvesting. This property purchasing strategy is usually specific to residential properties. A blend of “rent” and “investing”, it allows someone who has a budget to buy a property in a city that may not suit their lifestyle or work needs, so they take a lease on a property in a more expensive city in which they live and is more suitable to their lifestyle and the work that they do. 


What are the benefits?

There are benefits of rentvesting like enjoying the security of homeownership without the constraints of location or budget. Another benefit is tax deduction through negative gearing, a situation where the expenses associated with an owned property are higher than the income that it generated in a year. 


What are the risks? 

Just like with any other investment, risks are unavoidable. If your property becomes vacant for any reason, remember that as an investor, you are accountable for all mortgage payments and other expenses associated with ownership, such as taxes and insurance, among others. It's also important to consider the limited security of tenure, which extends only until the lease period ends. If you are unable to secure a new tenant, you will be obligated to cover the rent for your current lease without the additional income that you would normally receive from your rental property.

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Is it a safer investment?

Recently, rental vacancies are low, so finding tenants is easy, but this doesn’t mean permanence as it may change in the future. On a bigger picture, there’s also no assurance that the income you receive from your rental property will be able to cover your mortgage repayments. 


With these, it is always important to weigh in on the pros and cons of rentvesting before buying as a rentvestor, especially that the Australian property market is ever-changing and evolving. 


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