Australians generally have a common inclination to acquire or purchase property but the first thing that comes to mind is that not everyone has the capacity to afford it.

Many choose to rent for a number of reasons and many of them are due to a lack of funds due to the uncertain nature of income sources for some or may be afraid of losing employment due to an unstable economy.

While renting is a more affordable and realistic measure of ensuring people have a roof over their heads, chances are a homeowner could end up homeless should they end up losing a source of income, such as a business or employment.

Make no mistake, there are benefits to renting such as the affordability of living in a preferred location or community, or in an urban area or CBD.

The benefit of rentvesting

Rentvesting has become a popular option among homeowners of late and has become a mainstream strategy for many home and property buyers, whether opting to expand or diversify their portfolios or those just looking to find a place to reside in.

This is a relatively new concept apart from the many traditional real estate methods but is indeed a practical and appropriate path among the more contemporary homeowners especially among millennials.

One of the greatest benefits of rentvesting is that someone rents property in an area of choice and purchases relatively affordable property in a suburb.

A hit among young homeowners

The concept gained popularity in recent years when the prices of inner-city dwellings started to rise and millennials continued to stay at home with parents in order to save a large portion of their income through the years.

With the money saved up, many chose to invest in property and at the same continued to stay with their folks, while some moved on to rent a place somewhere else.

Many young first-time home buyers, their savings allowed them to get into the property market but not enough to afford to purchase in an inner-city, CBD, or beachside locale.

So, began the rentvesting boom.

Not for everyone

While it turned out to be a good option among the younger generations, it is not exclusive to the age group as it has been embraced by many older people who saw it as a good opportunity to invest and at the same time, be able to find a place of their choosing.

Many young professionals rent stylish apartments in the inner-city and helped them cut back on transportation costs and acquire property in an outer suburban property which they rent out to tenants.

The income earned from their rented property goes to the mortgage payments on the property and the rental for the inner-city apartment.

The pros and cons of rentvesting

Of course, it is not a perfect concept but it is an opportunity that cannot be passed up, especially when conditions and offers seem to fall into place.

However, one of the best benefits hat one can get out of rentvesting is that it is highly effective as a long-term strategy.

The process can take a great deal of time for the initial investment to earn through capital gains, so it is best approached through a long-term investment and financial strategy.

For one, it can be based on a low-cost investment that may need careful planning rather than weighing it out of your desires for a property such as buying one that may not be called your home but one that can allow you to make objective decisions.

For instance, you could begin with the smaller deposit in exchange for the mortgage covered by the rental payment of your tenants. The revenue can also make up to cover the property’s regular upkeep and other costs.

A great way to look at rentvesting is to follow the basic standards of investments – find a good suburb, purchase property that suits the rental market and one that can be attractive to a certain target demographic.

Remember that location is critical especially a property that has easy access to shops, schools, local facilities, transportation, etc. Just make sure that occupancy is stable and rental yields are.

When possible, find a good property manager who can help manage and provide you with proper rental and tenant relations, monitor the property, and give you up-to-date reports on the income and status of the investment property.

Just make sure that there will be costs incurred to pay for the services of a manager, so make sure to factor it in or include it in your budget when you have enough revenue to make up for it.

There will also be fees related to the operations and management of the property such as taxes and duties, as well as the upkeep and maintenance costs.

Another benefit is that rentvesting offers a lot of perks in terms of taxes which may be better than home ownership.

For instance, The Australian Tax Office (ATO) allows for deductions on costs incurred through ownership of a property investment asset, but not on your primary property of residence.

You can also claim depreciation such as costs of maintenance and repair of the property and other appliances, which are not entitled to those in a lived and owned property.

There are also other tax benefits that are deducted from your taxable income.

To choose or not to choose

At the end of the day, you get to choose if rentvesting is for you or not. It depends on your personal values and the path you want to take for your life in the coming years.

When leaning toward the traditional values of real estate ownership, rentvesting may not be an attractive option, but if you are open to change and want to consider it as a long-term investment strategy, then rentvesting may be ideal for you.