Should You Buy a Home to Live In or Rentvest?
Navigating Your First Property Purchase.
Buying a new property. It’s a big undertaking.
And whilst exciting, it’s a decision that’s likely to shape the next 20 – 30 years of your life.
So it pays to consider what property ownership looks like for you, and what you want to achieve.
But let’s face it - in a real estate market where property prices are regularly reaching new heights - many are seeking innovative ways to simply get their foot on the ladder.
And while owning a home to live in is usually the ultimate goal, one solution that’s gaining popularity is RentVesting.
Offering a unique - and strategic - remedy to the challenges faced by many first-time buyers, RentVesting is emerging as a practical alternative to compromising your lifestyle for a hefty mortgage or living in an affordable, yet undesirable, location.
So let's explore how RentVesting can be a viable option in today’s market, and compare it to the traditional path of buying a home to live in.
BUYING A HOME TO LIVE IN
Advantages of buying a home to live in
Homeownership in Australia is more than just a roof over your head; it's about laying down roots and creating a space that is uniquely yours.
Apart from the emotional connection to your first home, financially, owning a home also offers long-term security, provides a stable living environment, and also the potential to appreciate in value over time.
Every time you pay your mortgage, you build equity - a valuable asset that can serve as a springboard for future investments or as a financial safety net. And given property values in Australia tend to rise over the years, it's a way to ensure that your money is working for you over time.
Disadvantages of buying a home to live in
Owning a home isn't just about enjoying the perks; it comes with its own set of challenges too.
As a live-in homeowner, your location is fixed. Living in a home you’ve purchased ties you to a specific location, which can have an impact on everything from your job and family to your lifestyle.
Owning and living in your home also means a large portion of your capital is tied up in one asset, with no extra income to help cover the mortgage. This can limit your ability to diversify investments over time.
And finally, as a homeowner living in your property, all maintenance and upkeep falls squarely on your shoulders. There’s no landlord to sort out (and pay for) unexpected repairs, bills or problems.
RENTVESTING
So what, exactly, is RentVesting?
RentVesting is an increasingly popular strategy in the Australian market, especially among those who wish to enter the property market without compromising their lifestyle.
Essentially, it involves purchasing a property as an investment while you continue to rent elsewhere.
Differing significantly from traditional love-in homeownership, this strategy allows you to enter the property market, often in a more affordable area, while maintaining the lifestyle and location flexibility that renting provides.
Advantages of RentVesting
The appeal of RentVesting lies in its flexibility.
It allows you to live wherever you choose, which may not necessarily be where you can afford to buy, while investing in a property that fits your budget.
For those whose jobs or lifestyles require mobility, RentVesting also offers the freedom to move without dealing with the costs and hassles associated with selling and buying property, whilst keeping your biggest asset intact.
Additionally, owning a rental property can provide ongoing income, as well as a range of tax benefits not typically available to those who own and live in their homes, like deductions on property management fees, interest on investment loans, maintenance costs and depreciation
These tax incentives can make RentVesting a significantly more attractive option.
Disadvantages of RentVesting
However, like live-in homeownership, RentVesting isn't without its challenges.
One of the primary drawbacks of RentVesting is the inherent instability of renting.
Things like rent increases, the possibility of lease termination and the need to move due to circumstances beyond your control.
It also means that you're subject to the rental market's fluctuations - even finding an affordable rental, especially in high-demand areas - can be difficult, and lead to a lack of stability in your living situation.
On the flip side, you’ll also face the same challenges landlords face - finding and managing tenants, dealing with maintenance issues and navigating periods of vacancy. These responsibilities require time, effort and sometimes additional financial resources, especially if you choose not to use a property management service.
Plus, if your investment property's rental income does not cover its expenses, such as mortgage repayments, and maintenance costs, you may experience negative cash flow, putting serious strain on your resources.
So how do you make the decision that’s right for you?
Fundamentally, the decision between buying a home to live in or RentVesting should be guided by your lifestyle preferences and long-term financial goals.
Each path has unique pros and cons that can shape the way you approach the purchase.
Your comfort level with real estate as an investment is also worth considering.
Are you ready to take on the responsibilities of homeownership, or do you prefer the flexibility and potential income of RentVesting?
As with any significant financial decision, seeking advice from an experienced real estate professional can provide valuable insights and guidance tailored to your specific situation, and help you make informed decisions.
Their expertise can help guide you towards a choice that aligns best with your goals, ensuring a well-informed and balanced approach to your property journey.
Considering your next step?
Why not connect with us? The experienced team at We Connect Property can help you make the decision that’s right for you, and offer a completely personalised service along the way.
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As property experts with over 21+ years combined experience in buying, selling and managing property in Adelaide, We Connect Property are ready and waiting to offer expert guidance and support when you need it most, and answer all your questions about buying or selling your property.
Check out our 5 star Google reviews to find out what our happy clients think.
And if you’re just getting started, or looking for valuable property buying, selling or investing tips?
Check out these other handy articles on our blog:
· How do you know it’s the ‘right time’ to buy a new home?
· How to Find the Perfect Property
· What to Look for at an Open Inspection
Give us a call on 0403 799 983 today, or drop a line to sales@weconnectproperty.com.au - we can’t wait to chat!
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We Connect Property - your Adelaide real estate & property management specialists.
DISCLAIMER: All recommendations made by We Connect Property are general in nature and not to be relied upon as legal or financial advice. To ensure accuracy, we always strongly recommend seeking independent, professional advice tailored to your specific situation before making any investment or financial decisions.