Rentvest?

Rentvesting means renting in the suburb you want to live in and buying in another (probably lower valued) suburb in the hope of a good rental return and capital growth. 

Does it work?

It depends on a number of factors like where and what you buy, capital growth, rental returns, and the cost of where you are living now.

A few years ago our client, let’s call her Jessica, bought an apartment in Blackburn (Melbourne's outer suburb) for $500,000 and stayed renting in Richmond.  She had a bit of money to put toward the purchase as she had inherited from her Grandma and was also a very savvy investor.  She has $130,000.

Buying at $500,000 + government fees and charges of $23,365 and settlement costs of approximately $2,500 she has paid in total $525,865

She paid full stamp duty as she was buying for investment purposes.

As a first home buyer, she would avoid stamp duty as long as she lives on the property for a year.

Based on the contribution she made to the property the loan amount is $400,000

Interest on her investment loan is 4.4% and repayments are principal and interest of $2003 (she could opt for interest-only repayments but she decided to build up equity from the start), but this is offset by the rental return on her property which is $500 a week or $2167 a month

If she chose interest only the rate goes up to 4.65% and the repayment is approximately $1550 but the loan does not reduce

If she was living in the property rates for owner-occupied are slightly lower at 3.84% and repayments would be $1872.95

She pays rent of $2816

When you Rentvest we would assume you are doing it to build up equity and in the hope of capital growth.   

The benefits can be…

You live where you want

You can deduct costs for your investment property (check out the ATO website or speak to your accountant -)

You don’t pay repairs and maintenance where you live when you rent

The costs can be…

You might pay capital gains tax when you sell your investment property. Check out the ATO website.

You don’t pay this tax on an Owner Occupied home

You might pay land tax (check out your state revenue office for the rules here)

You have no control over your rental property – you could be moved on, rents go up, and leases end – all additional costs.

Give us a call on 0424 191 095 or make a time HERE to chat more about how this strategy might suit you.