According to Realestate.com.au’s renter research, more than 1/3 of Australians rent in more than 2.5M properties in Australia. Kurtis Pirotta, Rent Specialist from REA, has identified that 8% of tenants currently renting own an investment property. With interest rates historically low, an increasing number of renters are becoming buyers – with 50% of tenants looking to buy in the next 5 years.
Here are 5 good reasons why more and more people are actually “rentvesting” (purchasing a property with the idea of renting it out):
You could qualify for generous tax breaks
Property investors often qualify for tax breaks such as negative gearing. This lets you offset the interest you pay on a home loan against your income so that you pay less tax. You may also be able to claim the depreciation on your property asset, especially if you buy a new property.
It can be very cost-effective
Because someone else is paying off your mortgage and you’re receiving potential tax breaks, you could purchase an investment property for less than you think. For instance, our analysis shows you could buy a property worth $650,000 for just $76 a week (out of pocket) if your income is $70,000 a year.
A new revenue stream
Eventually, as the rent on your property grows, you’re likely to start earning more than you pay your rent every month, meaning, you’ll have a new income stream – passive income.
You could start building a property portfolio
Over time, as you pay down your loan and the market rises, you’ll build equity in your investment property. You can then use this as a deposit on your next property, giving yourself the chance to grow an entire portfolio.
You can keep your current lifestyle
Because you’re not living in the property, you can buy in an area you can afford and stay in your current location so that your lifestyle stays exactly the same.
And if you’re a tenant looking to own your own home, the Federal Government’s First Home Loan Deposit Scheme can support eligible first home buyers purchase a home sooner providing a guarantee that will allow eligible first home buyers on low and middle incomes to purchase a home with a deposit of as little as 5 percent (lender’s criteria apply).
Information for this article has been sourced from The Property Investors Alliance.