As more Australians see homes in their preferred areas further out of their reach, we expect to see more interest in rentvesting, allowing people to enjoy a better lifestyle by living in areas seemingly beyond their reach.

Rent-vesting has become a popular strategy for property buyers. Under the strategy, potential homeowners buy an investment property they can afford, perhaps not in the location in which they’d prefer to live, and rent in an area that suits their lifestyle or work needs. In short, it is what many homeowners have had to do for decades. Rentvesting is an effective method for getting onto the property ladder. But what do you need to know about rentvesting in Melbourne so you can advise your clients and protect their interests?

While it might seem that rentvesting enables your buyer agent clients to have the best of both worlds, there are pros and cons and you need to alert your clients to both sides of the coin.

The good

  • Your client can live and rent where they choose.
  • Your client can buy where they can afford, so they can break into the property market sooner with less financial stress.
  • In the client’s rental, the owner is responsible for maintenance.
  • Your client’s rent or cost of ownership might be offset by the rent from their investment property.
  • Buyers might get some tax benefits from an investment property.
  • As a buyer’s agent, you ave more scope to find clients a suitable investment property.
  • Your clients might enjoy the freedom of being able to move to a new area when their lease expires.

The bad

  • Clients will need to engage a property manager. On the plus side, though, the property manager (if they’ve chosen a good one) is responsible for rent collection, tenant requests and any maintenance or breakdowns.
  • When your client chooses to sell their investment property, they will need to pay capital gains tax (CGT), which does not apply to owner-occupied homes.
  • Your client might be notified to vacate from their rental if the owner decides to sell or renovate.
  • Your client might be frustrated at their inability to upgrade the property they’re renting

The ugly

  • If your client buys an investment property, they won’t be eligible for any of the state-based first homeowner grants. Missing out isn’t such a disaster, though, as the loss is likely more than offset by other factors like affordability, lower repayments and less financial stress.
  • Your client might not have the financial buffer to cope with having their investment property untenanted for long periods.

Want to up your game as a buyer’s agent? In our group,we discuss many topics including whether or not we should recommend rentvesting as a buying strategy for new home buyers so we all learn from each other.

Join us at Property Mavens Group

Currently we are in a growth phase and oversubscribed with client leads. For a limited time, we have places available in this strong buyers’ agent business, with leads in Melbourne, Geelong, Bendigo and Ballarat. Call me, Miriam Sandkuhler, on 03 9988 2266 to learn more.