There has been an increase in the value of investment properties as a result of the Covid epidemic being less of a concern for the health industry and the commercial market.
Rentvesting is an emerging trend in real estate, particularly among persons who want to own property but do not want to have to make big adjustments to their current way of life. The term “rentvesting” comes from the word “rent,” which refers to the rental income generated by an investment.
What is Rentvesting?
In today’s real estate market, there is no shortage of opportunities to be had. If you are looking for employment, the real estate market offers a wide variety of job prospects from which you can pick.
Because the real estate market is one of the safest markets in which you’ll ever find an opportunity to make an property investment, it’s a good choice whether the objective is to make your money grow or to purchase the house and lot of your dreams in the Philippines. The real estate market is one of the most secure markets in which you’ll ever find an opportunity to make an investment.
Rentvesting is a new trend that people who are interested in property investing in real estate should take into account so that they can diversify their portfolios. Rentvesting can be defined as the practice of renting out one’s own property to generate income.
Read Also: Guide for first-time landlords in renting your home
What You Should Be Aware of Concerning Rentinvesting
The practice of renting a property while also making financial investments in it is referred to as “rentvesting.” In a broader sense, rentvesting is a sort of real estate investment that encourages property buyers to acquire and invest in a property that is expressly meant to be utilized for rental business rather than for personal residential usage. This type of real estate investment is known as “rentvesting.” This kind of investing in real estate is also known as “rentvesting,” another name for it.
For instance, in addition to the residential property that one would own in the city, the owner might decide to make passive real estate investments in a property that is located outside of the capital region. This could be the case if the owner is interested in expanding their real estate portfolio.
That is to say, the purchase of a piece of real estate is intended to be used in a rental business, and consequently, the goal of making money through rental revenue is a primary motivation for making this purchase.
Rentverstors stand to make considerable financial benefits in the event that they choose to engage in investing in rental property on a more permanent basis.
Before deciding to become a landlord of rental properties on a full-time basis, an individual must first ascertain whether or not they are completely dedicated to the endeavor, patient, and have the necessary industry skills. They shouldn’t test the waters of this sort of active real estate investing until after these aspects have been taken into consideration, at which point they should do so.
What are the Benefits of investing in rental properties?
One of the numerous benefits associated with engaging in rent investing is the fact that you are not required to live in an area that you can only afford if you choose to do so. This is just one of the many advantages offered by this technique.
Furthermore, it goes to reason that if you make an investment in investment properties, you may be eligible for certain tax benefits.
As a tenant, you are also eligible to receive the benefits that come along with that status. If either your washing machine or your dishwasher breaks down, you won’t have to worry about the costs of repairing it because they will be covered by the insurance policy.
The Pros and Cons of Investing
Pros of Rentvesting
You are free to choose where you will make your home:
Because of Rentvestor, you are no longer limited to merely being able to invest in real estate in geographic locations where you can afford to do so.
1. Your rental home has relatively low expenditures associated with its maintenance:
Since you are a tenant, it is highly likely that you will not be required to pay any maintenance fees that are the result of regular wear and tear because of the fact that you are a tenant.For example, if there are issues with the supply of hot water, your agent will, subject to the terms of your rental agreement, schedule the necessary repairs to get them fixed.
2. Potential tax benefits:
There is a chance that you will be able to deduct some of the expenses that are connected to your investment property from the taxes that you pay. These include the interest that is charged on loans, the expenditures that are involved with renting, such as insurance and advertising, and the costs that are associated with depreciation of an asset. The Australian Tax Office provides guidance regarding the circumstances in which you are qualified to submit these claims.
3. Rental income:
You are able to put the money you make from renting out your investment property toward paying off the mortgage on the property or you may put it toward the cost of renting your own home.
Read Also: 8 Income Streams You Should Build
4. Potential capital gains:
If the value of the investment property you own rises in the future, you might be able to sell it at a higher price and make a profit from the transaction.
Cons of Rentvesting
1. Your primary residence will have a lower level of security because:
- It is possible that you will be asked to move out of the apartment in the event that the owner wants to find new tenants for the property or vacate it altogether.
- In order for inspections to take place on the property, it is conceivable that you will be required to make it accessible.
- Your rent could go up.
2. Ongoing expenses related to home ownership:
If you are the landlord of the property, it is customarily expected of you to be liable for any and all costs associated with necessary repairs as well as their management. You should also be aware that it is possible that a leasing agent will want money from you in the form of fees. If your rental revenue is less than your ownership costs, you will need to pay your own rent in addition to making up the difference between your rental income and your ownership costs. If your rental income is more than your ownership costs, you will not need to make up the difference.
3. Capital Gains Tax liability:
If you decide to sell your investment property at some point in the future, you will be obliged to pay capital gains tax in the value of the property that you have realized as a result of the sale. CGT is not required to be paid on the vast majority of homes that are occupied by their owners. The ATO offers an explanation of how this function is carried out. You need to pay tax to have tax deductions on you capital gains
4. There is no access to the First-Time Homebuyer Grant:
The First Home Owners Grant, which is granted for select first-time, new home owners who will dwell their property for at least the first year, is not available to rentvestors. The grant is intended for first-time, new home owners who will inhabit their property for at least the first year. Each of the states as well as the territories have their own unique set of laws. Continue reading for additional details.
5. Potential capital loss:
If the value of the investment property that you own diminishes, you may be obliged to sell it at a loss if you want to avoid losing money on the deal.
Why is rentvesting a good idea?
Rentvesting is a method that allows one to secure a secure financial future without sacrificing the quality of his or her lifestyle in the process. Rentvesting provides you with the flexibility to live wherever you like within a city, as opposed to being obliged to move to an area of the city in which you can afford to buy property. Because rent is so inexpensive compared to other living expenses, this is now feasible.
You will have already purchased an investment property during this time period, and it will be located in an area where prices are currently lower. This has the potential to improve in value, and at the same time, your tenants will gradually pay off your mortgage, which will lead to an increase in your equity. Both of these factors will work together to help you become more financially independent. This equity can be utilized at a later time as bank security when purchasing a property in the neighborhood of your choice or when acquiring further investments. Alternatively, it can be used to purchase additional investments.
Is Rentvesting an ideal investment for you?
It does not appear to make much sense at first glance; after all, why would someone pay off their mortgage while also paying their rent? It seems like it would be easier to just buy the house that you want to live in, doesn’t it?
There is not a solitary answer that is appropriate. Everything depends on how much money you already have, where you are in life, and the kind of lifestyle you want to have.
Consider the following scenario: you are a single individual who is interested in entering the real estate market but cannot afford the property of your dreams. What options do you have?
Or maybe you just found out that you won a beautiful rental property, but the timing isn’t quite right for you to make the move just now. Or, perhaps you are content with living in the city for the time being, despite the fact that you are aware that at some point in the future, you will want to move to a property that is further out and has more space, despite the fact that you are content with living in the city for the time being.
Through the practice of rentvesting, it is possible to obtain benefits from both the private and public sectors. Even if you plan to continue renting the home in which you are now dwelling, you may be able to buy a property and then rent it out in order to cover some or all of the costs involved with ownership by renting out the newly acquired property.
If the property that you own for investment purposes is successful and generating a profit, you might even be able to use some of that money to reduce the amount of rent that you pay on the home that you currently occupy.
