Rentvesting: Just a craze or a savvy move?

Shakira
Post : December 26, 2022

Everyone has a different financial situation and goals. Some people can afford to rent their property, while others cannot. Rentvesting is an alternative investment strategy that allows you to invest in properties with the hope of renting them out for a profit.

 It is an exciting way to invest in property with the potential for a good return, but it can be difficult and lengthy. In this article, I will walk you through how rentvesting works, the benefits, and how you can try it out.

Rentvesting is a form of investing where you put your money into rental properties. You invest in properties in good condition and with high-profit potential. It is considered a great way to make money quickly. There are a few things to keep in mind when you rentvest. 

  • You should make sure that you check the market value of the property you want to rentvest in. 
  • Make sure you invest in properties with long-term profit potential. You should also make sure that you invest in properties that are in good condition. 
  • Finally, you should ensure that you invest in properties in areas you are familiar with.

Benefits of rentvesting

Rentvesting is a great way to make your money work harder. You can rent your property and generate income from it when you are not using it. This is a great way to make extra income and save money at the same time. Most importantly, you get the freedom to choose where you want to live. 

This basically cuts off all the extra worries and solicitor's fees etc. Having an agent to take care of water, dishwasher, and plumbing issues makes you less responsible for every detail of the house. When you rentvest, the maintenance cost is quite low. Along with the obvious benefits, you get indirect advantages such as tax benefits, capital gains, asset growth, etc.

Downside of rentvesting

There is the issue of less security and stability. You probably must move if the owner informs you to vacate the premises. The rent can fluctuate depending on the economic situation. You must follow the tenancy rules and can not make any improvements without the landlord's permission, reducing personal freedom and preference. 

You potentially have to go through tedious paperwork procedures such as a mortgage, rental incomings, and outgoings. Then there are the tax liability issues. If you sell your investment property, you are obligated to pay tax for the profit you make. Finally, there is the possibility of capital loss. If the property's value diminishes, and you are planning to sell it as well, you might put yourself at a loss.

How to know rentvesting is the right move?

As with every other option or selection, rentvesting is not a good fit for this type of investment. If you are considering investing in rentvesting, you must consider your financial situation, goals, and risk tolerance. If you can do this, you can decide if rentvesting is the right investment for you. You should also consider the amount of time and effort you are willing to put into the process.

Doing extra research and getting advice from an expert won't ever go to waste. The capital gain tax is vital here because it is what you must pay when selling your investment property. But you do not have to when selling your own home.

Your cash flow will look much better in the short term. However, your long-term collective asset might suffer. Especially buying an investment property today will limit your options to purchase your dream house in the future.

Simply because you may not have enough capital to spend, investing is often looked at as entrepreneurship. These concepts involve quite a lot of uncertainty as well as the risk of failure. If you are someone who values stability over everything, renvesting is not for you. Not being able to live in one place might stress you out in the long run. 

That is why you need to consider your values before entering this concept. On the other hand, if you are someone who loves trying out and experimenting with new things, you should definitely try rentvesting strategy.

However, you should keep in mind that change does not always come at convenient times. It could be during a family crisis, or issue at the workplace, or simply when rent prices are getting high. Always be honest and ask the following questions before you dive in:

  • Should you rent or buy your home?
  • If you planned to rent, how would you invest the spare cash you would have used otherwise for the deposit? (There are many investment options other than real estate)
  • How solid or substantial is the investment you are making?

Conclusion

In the business world, there will always be new ideas emerging which are more user-friendly and revolutionized compared to the traditional method. Rentvesting is one of those approaches that many Australians, as well as many people across the world trying to adopt. As this is a new real estate strategy, whether it is a craze or a savvy, it totally depends on your perception and how you approach it. 

 

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