For many Australians, owning a Perth investment property is both a financial goal and a lifetime milestone.
However, it may seem out of reach for young Australians due to skyrocketing house prices. Buying a Perth investment property, leasing it out and then renting a separate property is an increasingly popular strategy thanks to its flexibility, affordability and tax benefits. Here are some of the main benefits of the rent-while-buy, or ‘rentvesting’, strategy.
Flexibility within one’s lifestyle is a top priority for many young Australians, which is why the rent-while-buy strategy can be the perfect fit. This strategy is ideal for those who need flexibility, perhaps because they travel for long periods of time, travel for work or wish to live in suburbs that fit their ideal lifestyle but are out of their buying budget, all the while simultaneously offering the growth and stability that is appealing about owning a property. Essentially, renting while buying means you can still change your home whenever you like rather than being locked into one location.
The rent-while-buy strategy can also be an attractive option for those who have additional funds with which they can invest, but are not yet at the life stage where they require to live in a property they own; for example, if they are not planning to start a family in the near future.
Potential positive cash flow
If you purchase a relatively low-priced Perth investment property and rent it out for a higher cost, you will be receiving positive cash flow. This means your tenant is covering your own rent while providing extra income; this rental yield can be helpful in paying off your investment property quicker. On top of this, owning a Perth investment property involves ongoing costs such as bills; if a tenant is paying these costs while paying rent, this will assist you in keeping your expenses low.
Eligible for tax deductions
Renting typically costs less than buying, as property ownership comes with costs such as strata fees, maintenance costs and other ongoing fees in addition to your mortgage. However, investment property costs such as mortgage interest, depreciation and maintenance can be tax deductible, which can lower your tax at the end of the financial year and provide higher savings.
Can help you buy a second property later down the line
You can use the equity on your first investment property to help you finance a second property later down the line. Equity is the difference between the market value of your Perth investment property and the remaining amount you owe to the bank. For example, if your house is valued at $600,000 and you’ve paid $250,000, therefore the accumulated equity is $350,000.
Investment properties which increase in value can provide substantial equity and wealth. With extensive research and a mortgage refinance, the equity on your first loan can be used as a deposit on your second investment property.
Choose your best investment strategy with Rentwest
Whether you’re looking to rent, buy or do both, hiring an experienced property manager is essential to determining the best investment strategy for you. Our expert team at Rentwest can help you with everything from financing and renting out your Perth investment property to finding the perfect Perth rental property. To find out more about our property management services, get in touch at firstname.lastname@example.org or 08 9314 9888.