Buying your first property is a big-time commitment and can be a long and tiresome journey. Rushing in to buy without doing some research can make the process a lot more stressful. Before making any major decisions, it’s wise to take the time and assess what will be the best pathway for you in the long-term so you make decisions your future self will thank you for.
Rent-vesting has become a buzz word in the industry but what does it really mean? There are some major differences between being a rent-vestor and being an owner occupier, so it’s a smart idea to weigh up your options, with each having valuable pros and cons to consider.
So, if you’re stuck thinking about which is more suited to you, let us help! We break down the basics of what kind of homeowner you may wish to become.
SHOULD I BECOME A RENT-VESTOR?
Rent-vesting has become an increasingly popular strategy where you rent a property to live in within a suburb you can’t afford to buy in whilst owning an investment property in a location more suited to your budget.
Let’s face it, as house prices move on an upwards trajectory, it becomes that much more challenging to own a home. Having an investment property still gives you significant exposure in the market that can be leveraged when prices inevitably shift and unlocks greater options for your financial future.
Why not get the best of both worlds? Rent-vesting enables you to live in a suburb you couldn’t afford to buy in and enjoy that lifestyle while investing in another growth suburb. You can also use income from leasing out your investment property to pay the mortgage on the property or down the track it could even help fund your own living expenses as well.
Importantly, rent-vesting can help reduce your tax burden and put more money into your back pocket while you are enjoying your rental lifestyle. It is important to seek financial advice from an accountant to ensure it is set-up in this way.
Affordability is one of the key factors to consider when thinking about purchasing property, but as a rent-vestor, your options are far more flexible and not limited to where you can afford to buy. Rather you can be savvy and pinpoint suburbs poised for growth to maximise your returns down the track.
If you choose to rent-vest, you may have to forfeit applying for a First Home-Owners grant that is only available to certain first home buyers who intend to occupy the property in the first year.
As a landlord, you may also need to incur ongoing home ownership costs and manage repairs and damage to the property and also be prepared with a financial buffer for ‘worst case scenarios’ like nightmare tenants or periods of vacancy where you have no rental income to contribute to the mortgage.
If your rental income is less than your ownership costs, you’ll need to make up the difference and this will likely impact on your own lifestyle
Also as a tenant – rents continue to rise over time, while as a home-owner, home loan payments usually reduce over time as the principal of the loan reduces.
Lastly, tenants live on the edge sometimes when it comes to lease expiries and evictions and as an owner-occupier your future home is secured. You can even paint and out holes in the walls to hang your pictures without asking for permission. Now that is freedom!
IS OWNER OCCUPANCY FOR ME?
Owning a home to live in is a dream come true for many. An owner-occupier is a person who purchases a home with the intention of living in it.
If you’re a homeowner, you have the flexibility to turn your home into an investment property later down the track, reinforcing the idea that buying property is a smart financial move. Owner-occupiers are eligible for the First Home Owners Grant that can help you save on the cost of purchasing. Owner occupancy offers greater stability in your living circumstances as well – think never having to pack boxes and move again unless you decide to!
Buying a house to live in generally means property management and maintenance can be easier with options to rework or renovate your home in whichever way you wish. Owning a home is a long-term investment that also provides buyers with long term security and over time equity is built which can be leveraged to purchase an investment property.
As opposed to rent-vesting, your options are limited to your budget and what you can realistically afford to buy. That might mean living somewhere that isn’t your first choice, a suburb with a longer commute that is further from friends and family or is in a less established area.
Owning a home requires upfront costs and down payments that may not be within your budget. When factoring in unexpected costs and any interest repayments, the process can be quite complicated.
As a long-term commitment and major life decision, you want to be sure you have chosen well – as it is costly to buy and sell property quickly within short time frames. By contrast, life as a tenant is free and easy with the ability to move with relative ease.
We hope this has put a spotlight on the differences between bring a rent-vestor or owner-occupier and helped you determine what will work best for you and your own circumstances.
Coposit can also take the stress out of buying a home, allowing you to secure a property with just $10k in savings, paying off the rest in weekly installments called ‘coposits.’
There is more than just one way to buy property. If you’re thinking about getting a head start in the property world, make sure to understand and research all the options available to you.