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August 14, 2018

New Trend in buying Property

Why First Home Buyers are moving to Rent – Investing

First_home_buyer_rent_investing

Let’s face it, the thought of buying a new home can be exciting and daunting for some first home buyers.

You’ve made the adult decision of purchasing a property because you want to move out of home and become independent. Maybe you are starting a new life with a partner and need more space or have dreams of creating a family. These are exciting times however when you look at the prices of the area you would like to live in that excitement can quickly fade away. You may ask yourself, do I have enough money for a deposit?  Can I afford to live in that dream home in my ideal location?

The sad reality is that many first home buyers in today’s market will purchase their first home on the outskirts of Melbourne and commute long distances to work and social gatherings only because their ideal location just wasn’t affordable for them.

What if we told you that you can live in your dream home and have that investment property at the same time? What if we told you that you can still live that lifestyle of being close to the city, work, family and enter the property market.

How Rent-Investing works

If you would like to get into the property market, you may choose to buy a home in an affordable suburb, leasing it out, then moving into the area that you desire to live in by renting yourself. This way, you can earn money on your investment property while ideally, the value of your property grows in time. 

Our very own Marketing Manager is an example of how rent-investing has worked for her. “I have a property in Point Cook which I have been leasing  for a number of years. It never suited me to live in that area as it is too much of a distance to family and friends. I therefore chose a location to live in which is closer to the city, public transport, and all the cafes and restaurants at my doorstep. My property has also increased in value over time which means that when i choose to buy a house to live in I can use the equity in my Point Cook property as leverage for the new mortgage”. 

While it may seem counter-intuitive to be both a home owner and a renter, there are some benefits to rent-investing, including:

Not Compromising on your lifestyle

Live in the area that is comfortable and convenient, close to work, schools, friends and family without having to consider the house prices that area commands.

You also have more flexibility when it comes to moving around, plus you don’t have the responsibility of the major maintenance around the home.

Start your investment portfolio sooner  

The big question is when to invest? Should you wait til the house prices drop and hold onto your deposit but then also risk buying at a higher interest rate? Should you wait for a bigger deposit so that you can buy in that ideal location? Rather than waiting on that decision and risk losing out all-together, you’ll be able to utilize a smaller deposit to buy an investment property while still saving for that ideal home.

Building your finances and tax benefits

One of the key benefits of owning your own home is the capital growth potential. That is, the increase in the property’s market value over time. Rather than spending all of your money on paying off someone else’s loan, you’re renting a reasonable home, paying less in loan repayments and council rates in a cheaper property. You’ll have an income coming in as well, with the rental payments you’ll be getting from your tenants.

Following the rent-investing path means you’ll also be able to more quickly build up your investment portfolio. When it comes time to sell your investment property, you’ll be able to leverage the equity to help you land your desired home. Then there are the tax benefits that apply to investors. These include tax-deductible council rates, insurance, maintenance costs and property management fees as well as depreciation on new homes.

While rent-investing isn’t for everyone, it is one way first home buyers are getting into the property market sooner than they otherwise would have.

If you would like more information on rent-investing and how it could work for you, our Kurv Leasing specialist is available for a free no obligation enquiry

 

Written by Heather Christodoulou for Kurv Leasing Pty Ltd, Sept 2018