Should I 'rentvest' or buy my family home?
21 May 2020
Have you ever considered creating your ultimate lifestyle by living where you want to live, while strategically investing in property? John Pidgeon from Solvere Wealth discusses the concept of rentvesting.
The goal of living your ideal lifestyle while also executing a strongly researched and planned investment strategy is achievable. This is what we call rentvesting.
Deciding whether rentvesting is for you should be a well-considered decision. A good starting point should be defining exactly what you want and what your priorities are at the current stage in your life.
Put simply, rentvesting is about getting the best of both worlds by renting where you want to live and also being able to invest where you want to invest. The purpose of this is to maximise your living now, all while investing where your strategy best places you at the time.
There can be a few mental roadblocks when it comes to rentvesting, but rather than being bogged down by the traditional belief that ALL ‘rent money is dead money’ but rentvesting allows you to use renting as part of an effective overall investment strategy.
If you do choose to rentvest, be prepared for some negative energy and old-school thinking around this for not buying your ‘own home’ sooner.
Lowest interest rates for 1-year fixed home loans
The comparison table below display some of the 1 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).
*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.
Lowest interest rates for 3-year fixed home loans
The comparison table below displays some of the 3 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).
*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.
Lowest interest rates for 5-year fixed home loans
The comparison tables below display some of the 5 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by ‘current rate’ (lowest to highest), then by provider name (alphabetically).
*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.
Related article: How do home loans for investment properties work?
The reason for this is not because your friends and family don’t love you or care for you, it is actually quite the opposite. They think that the best way to move forward in life is to buy your own home to live in. After all, you’re busting the ‘Great Australian Dream’ fallacy and taking a powerful, non-traditional route towards your long-term wealth. Outside of the box thinking often makes people uncomfortable. But don’t let it stop you.
This confident approach doesn’t mean getting rid of your friends or family either, it simply means getting sound advice and talking to those who have succeeded before you in this area. If you wanted to be a star in Hollywood, you wouldn’t spend your time with someone who has never acted!
This style of living and investing has the ability to create wealth in your life, long before you start a family and the cost of children and schooling kicks in. By weighing up all options, and deciding on your strategy, you have an opportunity to invest soundly for the future.
There really is no one size fits all property strategy. Below are some pros and cons I believe are worth considering before jumping in:
PRO’S
- You have the potential to enter the property market sooner.
- You can live where you want to live and enjoy a better lifestyle.
- You can start building your investment portfolio and follow through with your strategy.
- You will have more investment property choices.
- You have the freedom to live in and try different parts of Australia – or even the world – so you can decide where you really want to settle down and buy your principal place of residence (PPR).
- There may be some tax aspects worth learning about from the ATO.
CONS
- The perception of rent money being ‘dead money’ given sunk costs.
- Less stability in your living arrangements.
- You may need to develop a thick skin (keep your eye on the long-term plan – you’ll make naysayers uncomfortable by breaking the property mold).
Remember, roots can be planted when and where you want to plant them – it doesn’t depend on a house. Based on my own experience with property investing, I believe rentvesting is a fantastic way to propel you forward towards your property goals until you find your dream home in your dream location.
About John Pidgeon
John Pidgeon is the Director and Head Property, Finance, and Business Educator of Solvere Wealth and Co-host of My Millennial Money podcast. John is also the creator of the Solvere Online Academy, which aims to educate investors at every stage of their financial journey. He has a Bachelor of Arts and Teaching, Health and Physical Education and Fitness at University of Ballarat.
Follow him on LinkedIn.
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