Are you dreaming of a sleek new kitchen, a beautiful outdoor deck, a luxurious bathroom, or perhaps an extra bedroom for your growing family? Home renovations can transform your living space and increase your property’s value. But let’s face it— renovations can be costly. The good news? There are several ways to finance your home […]
Pros and Cons of Buying Your First Home While You Rent
These days, first-time home buyers are increasingly exploring innovative strategies to enter the real estate game. One such approach gaining traction is buying your first home while continuing to rent. This strategy, often called “rentvesting,” offers an investment opportunity and lifestyle flexibility. But is it the right move for you?
Let us help you decide by discussing the pros and cons of this modern approach to homeownership and how Deltos Finance can assist should you decide to rentvest.
What Is It Like to Buy Your First Home While Renting?
Buying your first home while renting is indeed a form of rentvesting. This strategy involves purchasing a property as an investment while continuing to rent in an area where you prefer to live. It’s a viable way to get your foot on the property ladder without compromising your current lifestyle or location preferences.
Say you’re living in a trendy inner-city apartment in Sydney and want to acquire your first house in a more affordable area but can’t give up your urban living in the big city. Rentvesting can be a happy compromise. You can continue enjoying the vibrant urban lifestyle while owning a property in a high-growth suburb or regional area like Hobart in Tasmania. While not your primary residence, this first-owned property can become your ticket to building equity and generating rental income.
If you seek more answers to questions like ‘What is rentvesting?’ and ‘Where should you rentvest?” head to one of our other blogs titled ‘Let’s Talk About Rentvesting in Australia.’ For the next sections, we’ll focus on the pros and cons of rentvesting to help you decide whether it’s the most suitable path for you as a first-home buyer.
Pros of Rentvesting or Renting to Buy a House
Purchasing your first home and renting out that property while continuing to live in your rented apartment or condo in the city has a few upsides. Here are some of them:
- Enter the Market Sooner: When you buy your first home or investment property in a more affordable area, you can potentially enter the market earlier than if you were saving for your dream home in a bigger city or pricier location.
- Build Equity While Maintaining Lifestyle: You start building equity in a good property without compromising your current living situation or lifestyle.
- Potential Tax Benefits: As an investor, you may be eligible for tax deductions on expenses related to your investment property, including interest on your mortgage.
- Maintain Flexibility: You can move for work or lifestyle reasons without the hassle of selling your primary residence.
- Diversification: Your investment property can be in a different location or property type, diversifying your property portfolio from the start.
Cons of Purchasing Your First Home While Renting
If done right, buying an investment property and renting it out can help you build wealth. However, if you’re doing it while continue renting an apartment or house, it may come with a few disadvantages, including:
- Dual Costs: You’ll manage two sets of housing costs—your rent and mortgage repayments. That can be financially challenging if you fail to prepare your finances for rentvesting or experience negative gearing in your investment.
- Missing Out on First Home Owner Benefits: In some cases, buying an investment property first may make you ineligible for certain first-home buyer grants and concessions. Be sure to consider that before deciding to rentvest.
- Emotional Disconnect: You may not experience the emotional satisfaction of living in your own home, which is important for some buyers. That is unless you’re firmly determined to own a rental house as your first property.
- Property Management Responsibilities: As a landlord, you’ll need to manage tenants and property maintenance, which can be time-consuming and potentially stressful, especially if you live far from your rental property. The workaround here is to engage a local property management company.
- Market Risks: Like any investment, there’s a risk that your property may not perform as well as expected, potentially affecting your financial position and goals. So, be sure to consider different market factors before rentvesting.
More Considerations Before Making a Decision
Besides the clear pros and cons of buying an investment property as your first home while you continue renting your existing residence, here are more things to consider:
- Location Research: Research potential investment locations thoroughly. Look at rental yields, capital growth potential, and local market conditions to ensure you purchase your first home or any property in a profitable area.
- Financial Planning: You must assess your financial situation before making a big move like rentvesting. For instance, evaluate your ability to manage both rent and mortgage repayments long-term. It’s also a good idea to see whether you have enough funding to engage the services of a property management company monthly and spend on maintenance activities.
- Future Goals: Consider how this modern approach to homeownership aligns with your long-term property and lifestyle goals. Eyeing to own a property in Tasmania? Feel free to consult with experts like our mortgage brokers in Hobart, Launceston, or Carlton to see whether rentvesting is suitable for you.
- Tax Implications: Owning an investment property in Australia may come with tax benefits. Still, talk to a tax professional to understand the full tax implications of rentvesting as your property investment strategy.
- Loan Structure: Explore different loan structures that might benefit your situation, such as interest-only loans for investment properties. With interest-only repayments, you can manage your cash flow more efficiently for a specific period. Speak with experienced mortgage brokers to learn more.
How Deltos Finance Can Help
At Deltos Finance, we understand every first-time buyer’s situation is unique. Our expert mortgage brokers in Tasmania can help you maximise buying your first home while renting by assessing your financial position. We’ll help you understand your borrowing capacity and how it aligns with your investment goals.
More importantly, we have access to an extensive range of lenders in Australia and can help find a loan product that suits your rentvesting strategy. We’ll also help structure your loan to maximise potential tax benefits and minimise financial stress.
Buying a rental property as your first home while renting can be a practical way to enter the property market in Australia, but it’s not without its challenges. By partnering with Deltos Finance, you’ll have expert guidance every step of the way.
Contact us today to get started.
Enquire Now
Find Your Perfect Finance Solution
Let's discuss your finance needs. We’re here to help.
More posts from Deltos Finance
Ultimate Guide to Home Loan Redraw Facility
You’ve been diligently making extra repayments on your home loan, watching your balance shrink faster than expected. But then, life throws you a curveball with an unexpected expense, or you suddenly get a time-sensitive investment opportunity. Wouldn’t it be great if you could access those extra funds you’ve paid into your mortgage? You could if […]
Guide to Home Loans for Self-Employed Borrowers
You’ve taken the bold step of being your own boss, and now, you’re ready to take another significant leap—buying a home. But you might wonder, ‘Can I get a home loan if I’m self-employed?’ The answer is a resounding yes! While your experience might differ from getting a standard mortgage, you can successfully secure a […]
The Different Types of Property: Which One is Right For You?
Buying a property is more than a big-ticket purchase—it’s an investment and a lifestyle choice. So, it pays to consider various factors when finding the right property. Do you prefer a four-bedroom home in the suburbs, a townhouse in the inner city, or an apartment in the CBD? How about a fixer-upper? So, before you […]
A Comprehensive Guide to Buying Your Second Property
Over two million Australians own a second property. Some do it to invest in real estate and increase their wealth, while others simply want to improve their lifestyle with a holiday home. Whether you share the same sentiment or not, purchasing a second home is a huge decision not to be taken lightly. Continue reading […]
Bridging the Gap: Bridging Loans for Property Development
In property investment, timing is everything. Whether you’re eyeing a prime development opportunity or planning to flip houses to upgrade your portfolio, the ability to move quickly can make all the difference. This is where bridging loans may come into play. They offer a fast, flexible financing solution to bridge your financial gap between property […]
Maximising Your Local Mortgage Broker Relationship
Whether buying your first or second home or investing in multiple properties, having a trusted local mortgage broker by your side can make all the difference. The right financial guidance and local insights can point you in the right direction and make your real estate decisions pay off. You can get better results if you […]
Buying a Holiday House: Holiday Let vs Buy-to-Let
It is incredibly enticing to escape to a cosy beachside retreat on weekends or stay in a charming mountain cabin during the holidays. Owning a holiday house is a dream for many Australians; it can also be a savvy investment strategy. However, deciding whether to use your vacation home as a holiday let or a […]
Is Buying a Second Home Right for You?
The idea of owning a second home can be incredibly appealing. It could be a holiday house or an investment property that can generate additional income. But is buying a second home the right decision for you? Let’s explore the key considerations and steps involved in purchasing a second property in Australia. Top Reasons for […]
How to Use Equity to Buy Another Property
As a homeowner, you’re sitting on a valuable asset that can do more than provide a roof over your head. Your property’s equity can be a powerful financial instrument to help you buy a second home or expand your real estate portfolio. So, whether you’re dreaming of a holiday home by the beach near Carlton […]