Renting out a property that you own while paying rent to live somewhere else initially seems like a strange thing to do. But “rent vesting” is becoming more and more common, which is due to a mix of financial and lifestyle factors.
Why would you do that?
Gaining entry into the housing market is a key benefit of rent vesting. While 66% of Australian homes are owner-occupied, the percentage for people under the age of 35 is much lower at 50%.
Young adults are increasingly choosing to live with their parents, helping out with a little bit of board while also using a tenant to help pay off an investment property. It might make it possible to buy a house or invest in real estate more quickly than would otherwise be possible.
More and more “rent vestors” are renting homes in desirable suburbs where they can’t afford to buy while investing in a less desirable but potentially more profitable area. The variation in rental yields is what is causing this trend. In comparison to yields of over 6% offered in more affordable suburbs, rents in desirable neighborhoods typically run as low as 2%.
In the opposite circumstance, some people choose to rent inexpensively while purchasing a more expensive property, frequently in the hope that the investment property will experience a faster rate of capital growth.
Then there are those who want or need to move frequently but still want the security that owning a home can bring.
You’ll make it work if you want to.
Despite how appealing the lifestyle advantages may be, rent vesting must also be financially viable. You must be able to afford your rent as well as any net costs associated with your investment property, at the very least.
Long-term, rent vesting also aims to put you in a better financial position than you would be in otherwise, so it’s important to understand the real estate market and form an opinion on price trends.
Additionally, there are a number of tax considerations to keep in mind, both good and bad:
If the expenses for your investment property (interest payments, council rates, insurance, agent fees, etc.) exceed the rental income, or if the property is negatively geared, you may be able to claim a tax deduction against your earned income.
Any excess of rental income over expenses is taxed at your marginal tax rate.
You must use your after-tax income to pay the rent on the home you currently reside in.
While a profit from the sale of a primary residence is tax-free, any profit from the sale of a rental property is subject to capital gains tax.
Please visit the ATO for further advice or seek advice from your licensed Accountant
Is it suitable for you?
Do you like the thought of enjoying the sea views from your rented home while a tenant settles the mortgage on your prime investment in a burgeoning neighborhood? It might be worth investigating. Just make sure you comprehend the idea completely. Although they might not offer advice on direct real estate investment, your financial advisor can serve as a sounding board to make sure you have everything covered.
For any rent vesting advice or to enquire about a one-on-one with Suzana Wade from Locate Property, contact us today.
Knowing how to present a strong rental application is crucial when looking for a new home. In 2022 an unprecedented demand for rental homes drove Brisbane’s residential vacancy rate to as low as 0.06%, which was the lowest level in more than 20 years. As a result, there has never been more competition when looking for homes to rent. Suzana Wade of Locate Property runs one the most successful Property Management firms in Brisbane and offers her top 5 tips to get approved as a tenant in 2023.
1) Before you begin your search, get the first few essential items ready. Assemble all necessary documents, such as payslips, references, tenant ledger, and photo identification. The application process will go more smoothly if everything is ready and included. It will also show that you are very interested in the property. If you can cut down on the time that property managers have to spend processing your application, you’ll move to the top of the list.
2) You’d be surprised at how far good manners can get you, so be punctual and courteous. Make sure you make yourself known to the agent by going above and beyond to stand out from the crowd. Arrive at the property five minutes early to see it because the majority of agents have appointments back-to-back, and by turning up late, I’ll miss the inspection or the agent has already spoken to numerous groups before you.
3) Ask questions about the property to demonstrate your interest. This is a wonderful opportunity. Introduce yourself so that the agent and the landlord can put a face to the name in order to differentiate yourself from the other applicants.
4) Do you have a pet dog or cat? pet? Include a bio or pet resume on the animal as a wonderful way to individualize the pet and support your application to ensure acceptance. Include a description of the animal and a photo of it. Just as important as your own conduct is that of your pet from the previous residence.
5) Are you a new renter? Gaining entry into a competitive rental market can be crucial to success. To gain the trust of the agent, think about providing a 6-month lease. This is a fantastic first step in proving your ability to be a great tenant and your dedication to a long-term partnership with the agency. Make a unique offer as an alternative to persuade the agent to accept your application. If you are still struggling to get approved, consider, renting a room in a share house to start building up the required rental history.
If your adult children are currently residing with you, think about including them in your current lease. When the time comes for them to leave the nest, they will have an advantage because they will already have built their own rental history.
A great source of information and tips also come directly from the REIQ. For other great tips in 2023 follow Suzana Wade at locate.net.au/blog
As the Principal/Licensee of Locate Property in Brisbane, I have had the chance to actively participate in all aspects of real estate in both of the areas’ enduring appeal. Throughout my entire stay, I’ve had the good fortune to spend a lot of time in Brisbane’s top two “most expensive suburbs.” Blue Chip assets like Bulimba Property and New Farm are both suitable for any portfolio. Given that both of these communities offer opulent lifestyles and exceptional real estate, it is impossible to choose which is “better,” but let’s examine the differences anyhow.
“The median home price in New Farm is $1.5 million, while that in Bulimba is $1.2 million,”
The most expensive area of Brisbane is New Farm, where homes typically cost $1.5 million. The median home price in Bulimba, which is the second priciest suburb, is $1.2 million.
The spectacular Victorian-style homes, lush gardens, and hip restaurants of New Farm, which is located on the north bank of the Brisbane River, are well-known. Due to its proximity to the city and cosmopolitan atmosphere, the neighborhood is a fantastic option for those who want to lead a hectic city lifestyle.
On the south bank of the Brisbane River, Bulimba has a more suburban feel with its calm, tree-lined streets and welcoming neighborhood. Families who value a laid-back pace of life will love the area’s abundance of parks and playgrounds, as well as its renowned dining and shopping establishments.
Both locations receive excellent service from the city’s bus and boat services, making it simpler for locals to get around. Bulimba has more schools because it is located in a more suburban area, including the prestigious Private All Hallows School, Balmoral State School, and Bulimba State School.
Both Bulimba and New Farm provide opulent lifestyles and first-rate real estate; each suburb has its own distinct personality and draw. It is impossible to choose a winner because both Brisbane suburbs are leaders in their respective fields. Whether you prefer a city or suburban setting, New Farm and Bulimba probably have something to offer. To choose which of these two suburbs, as opposed to Bulimba Property and New Farm, best suits their lifestyle and personal preferences, each person will need to weigh the benefits and drawbacks of each.
One of the posts I write as the Principal and Licensee at Locate Property is a review by Suzana Wade.
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