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Thursday, 24 November 2016

How to be a Rentvestor

Today I read an article about how an Australian lady was renting a nice property in town. She was staying at a nice address, but she could not afford to buy a property around that neighbourhood.

But in her mind, she knew that she would be silly not to invest in real estate. Hence, her search for the right strategy started. After all, property ownership is a dream for many people, and they grow up expecting that they will dump all their life savings into a property.

Most people invest in liveable houses, but if you want to invest in a house that fits in the size of your hand, let me know. On a more serious note, investing in property can lead to long term benefits, which we discuss below.

Enter The Rentvestor Strategy

Eventually, after searching high and low, the Australian lady found the "Rentvestor" strategy:

a) Rent a property in the city, and
b) Buy and rent out a property in the outskirts.

The term was apparently coined recently by a real estate agency called "L.J. Hooker", but it's just like putting label to something that people have been doing for a long time. It's just like when explorers from the West ventured to Asia and started naming things ... the names tend to stick, despite the fact that the names are different in the natives' language.

The Benefits of Rentvesting

By becoming a Rentvestor, the lady would benefit in the long-term through owning property, i.e. her property in the outskirts of the city. Here are some benefits:

  1. You can rent out your more expensive property and live in a cheaper (rented) property, thus using the rental income to pay for your rental expenses;
  2. You can claim loss if your rental income does not bring in the rental that you hope it would, thus providing for tax relief (i.e. "negative gearing");
  3. Your property will go up in price over the years, and so will your rental income from your property;
  4. When you finally retire, your property would have been paid for, thus giving you a place to stay;
  5. You can enjoy an active lifestyle in the city, and stay in the city, while preparing for the eventual move to the outskirts;
  6. If you're planning to get married, women find men with property to be more stable and (hopefully) more attractive;
  7. If you're planning to have kids, they will appreciate houses at the outskirts of the city which will have front yards and space to plant flowers; and
  8. If you're making a tonne of money, putting your money into property investment is one way of making your money grow (better than fixed deposit, in many countries).

Why should you consider becoming a Rentvestor?

Getting Started with Rentvesting

Here are some ideas to get you started with rentvesting.

  1. Talk to people in banks, liquidators, accountants, to find out whether there are any below-market investment opportunities;
  2. Talk to lawyers about purchasing and renting out the property;
  3. A friend of mine calls up real estate agents from time to time, asking them to show him their listings. Sometimes he gets information about a really nice property, which he invests in.
  4. Take drives to the outskirts of your city from time to time, to look for houses that have been put out for sale.

Here are some articles for further reading:

Thanks for reading

Here are some other links from me: