Why ‘rentvesting’ is a wise move
When talking about the home of their dreams, many people imagine themselves living in a gorgeous looking house. To some, they imagine an even bigger picture. They foresee an even bigger advantage in turning their dream home into an investment.
It’s a common notion to many that rent money is considered as dead money, which is why a lot of people opt to just buy their own home instead of paying rent money to their landlord each week. However, when you come to think of it, that’s not really the case.
Take a look at it this way. Let’s say you choose to continue renting, then buy a house to rent out and use the rent money to pay the mortgage. You’re still paying money to your landlord, yes. But at the same time, you are also earning extra income that can potentially grow through time.
Here are the advantages and disadvantages of “rentvesting” to help you decide for yourself:
Advantages
- You can choose to live wherever you want – Unlike living in your own house, renting allows you to choose where you want to live and for how long. It is a more flexible option especially when your job requires you to move from one place to another.
- Allows you to adjust your budget – One of the biggest financial burdens to a household is indeed mortgage repayment. On the other hand, if you are renting, you have the option to cut back on your budget according what suits your financial abilities.
- No more entry and exit costs – Do you know how much it costs your property portfolio every time you move? It takes about 8% of your property’s value when you sell your home and purchase a new one. Whereas when you’re renting, the biggest cost is furniture removal and delivery only.
- Plenty of tax deductions – An investment property’s interest repayments are fully tax deductible. This means that you’ll enjoy great savings come tax time.
- You get to live in a nicer home – People often tend to settle in their home simply because it’s what they can afford to pay for. When you’re renting, you’re not required to pay land tax and maintenance of the property. This allows you to rent a more expensive place.
Disadvantages
- Packing – If only we could skip this part. What else can be more hassling than packing your belongings (that you have given so much time and effort in setting up) only to unpack them and arrange them all over again in another house?
- Less options – More often than not, there are more owners compared to renters in premium-style properties. This means that it’s less likely that your ideal home is open for renting. Finding your dream home can be more difficult as it seems unless you are looking into the buyer’s market.
- Everything is temporary – The thing is, the home you live in is essentially not yours. If you’re more of a sentimental kind of person, you might have some attachment issues to face when it’s time to move out.
