What Is Rentvesting?
- Posted By Tania El-halabi
So what is rentvesting?
Rentvesting is a home-owning strategy where you rent a property to live in that's right for your lifestyle, while you own an investment property that's right for your budget. As home prices in inner-city areas have gone up, this strategy is increasingly popular, especially among younger buyers.
Rentvesting has emerged as a result of the increasing difficulty of purchasing real estate closer to the city.
Therefore, we are beginning to see values in certain urban areas start to rise over, perhaps, what the ordinary household can afford. However, the typical family still desires all the comforts and lifestyle benefits that come with living close to a city.
In simple terminology; Rentvesting is the practice of renting a property in a particular place while using the difference between what it would cost you to own there, or your mortgage payments, and using that difference to invest in something else.
For those looking to start out in real estate, rentvesting can be a fantastic alternative.
Many Australians find themselves in a very favorable economic position as the world gradually approaches a post-pandemic new norm. We are once again in love with real estate thanks to historically low borrowing rates and robust government backing for the housing market.
Because property values increase over time and, more significantly for investors, rent can contribute to their passive income in retirement, many Australians view real estate as a particularly attractive asset to own.
Being able to afford the kind of home you want in the neighborhood you want to live in can be difficult for many people.
There are three principal choices:
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Yes, you can currently afford a home that matches your needs.
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No, it doesn't work at that price, so you make a compromise and perhaps buy somewhere more in line with your budget.
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Since renting is less expensive than making mortgage payments, you can choose to live where you want in a suitable home, but you'll have to purchase an investment property.
This third choice is essentially the idea of "rentvesting," when an individual or family decides to rent where they wish to live while putting their extra cash to work by purchasing an investment property to increase wealth and make up for not purchasing an owner-occupied property.