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Rentvesting: a forgotten way to own and rent at once

You’re serious about getting into the investment game even though you don’t have a home in your own name. Fortunately, this isn’t an obstacle. Investing in property whilst renting at the same time, or ‘rentvesting’, made a splash early last year. It’s still going strong, despite getting less coverage in the headlines.

 

Why is rentvesting so popular?

There’s a number of things that make renting a more viable option among investors and people house-hunting in general.

 

Freedom: The word ‘mortgage’ scares the skin off lots of people and they can’t face the idea of juggling multiple home loans at once. It’s easier to sink their money and effort into their investment. Investors can give their full attention to the investment properties they own, like organising renovations, speaking with property managers, and organising depreciation inspections.

 

Postcode envy: So you can’t afford to own a home in that ‘happening’ and ‘ritzy’ suburb. But there’s enough in your budget to rent. You can rent where you want to live and then buy property in outlying suburbs. You can rent that fancy inner-city apartment but rent out a three-bedroom house to a family a few suburbs over.

Affording to live in the CBD area is enviable

 

Money: Investors who live in a rental home don’t have double the amount of taxes and duties that come with  owning an investment property and their own home. And there’s plenty of benefits that come with renting out a property for investment purposes. Tax deductions cover real estate advertising, some legal costs, and general maintenance. The amount of money earned back in tax depreciation will increase the longer the investor owns a property.

As a rentvestor you have more financial freedom

 

Rentvesting is a way for first-time investors to get on that first rung of the property ladder. Prices are increasing on the market but living the rental life has eliminated this affordability problem for some. Those who rentvest get the freedom, the bragging rights, and the money back that other property owners miss out on.

 

Need more advice? Read on…

  1. What $500,000 can buy you in the 2017 property market
  2. Don’t make these 6 mistakes if you want the best property investment possible

3 real estate strategies to build the ultimate portfolio

Commercial, residential, apartments, houses, duplexes; the potential in real estate is endless. There’s different real estate strategies that investors can use for any of the above. Each approach has its pros, cons, and methods that will build your portfolio into something amazing.

 

Commercial property

There’s more differences between commercial and residential real estate than just the name. When placing a deposit on a commercial property, expect to put down up to 30% of the settlement price. You’ll also need a tenant that guarantees income no matter how competitive the market.

Lots of work goes into researching commercial real estate. Investors must look at demographics, market potential, spending habits of residents, and the like to make sure they get the best return. When the tenant signs the lease, the contract will last a long time compared to a residential one. Think between three and ten years.

 

Capital growth

You put a lot of work into finding a good piece of real estate, so it should work for you in return. Capital growth means you hold onto the home for a while, expecting it to make a nice profit when the time comes to sell. The resale price is affected thanks to area profile like access to schools, public transport and shopping.

Investors using this strategy must have patience if they want to see the benefits. Working a depreciation schedule into this will also help you net a larger profit. When the building depreciates, so does the cost base. Lower cost base (aka lower worth at resale) means less capital gains tax to pay.

 

Surrounding suburbs

It’s oh so tempting to buy in a capital city, but it costs more money and there’s often too much competition. The Australian apartment glut means investors are snapping up properties in bulk, almost suffocating each other in one suburb or just one building.

Popular growth areas aren’t just suburbs in the city. Regional, outlying real estate is great for negative gearing, with the eventual goal of a profit at resale. This is because investors see the potential in the homes and the general area and have the patience to wait for the right time to sell.

How your depreciation schedule give you bragging rights

Having a depreciation schedule isn’t anyone’s idea of a ‘must-have accessory’ but it pays off in more ways than one. Seasoned investors and business owners with several properties under their belts know well the bragging rights they’re afforded when they’ve got the depreciation schedule in their hands.

 

It’s less work
Tax time is the bane of most people’s existence . Organising account information, making sure expenses are correct and the like is a pain if you’re not organised. When you own investment properties, or brick-and-mortar stores, the amount of work increases substantially.

This is where the depreciation report comes in. After the quantity surveyor does their walk through and the company mails you the report, a large bulk of the tax reporting for those properties is complete. You don’t have to triple-check bills or receipts for a long time unless you do renovations.

 

It lasts for a LONG time
Ordering a depreciation report isn’t an annual task. It’s valid for the lifetime of the property. Companies like Deppro create reports that last forty years, so you’re set for life, or at least as long as you have the homes/shops in your portfolio.

This means, though, you must act quickly. As soon as you settle the deal with the real estate agent, get the depreciation experts in to assess. They prefer to see everything in the condition you bought it to make an accurate report. If the previous owners made renovations, then that’s a bonus as you’re eligible to claim their work in the report!

 

More (money) for you
The biggest bragging right of all? You’re paying less tax! Because you got the depreciation report done and passed off to your accountant in record time, there’s more money flowing back to you come tax time.

Fun fact: the fee for ordering the depreciation schedule is deductible.

A depreciation report isn’t glamorous, but its benefits are worth their weight in the size of your tax return. You can feel a little smug having less work on your plate organising expenses. Your accountant has the report, and you have the time to run your business.