Confused Picking Between Your Dream Home and Rental Property?

Updated: Jan 13

Key Considerations Before You Pick One.

There is no doubt that homeownership remains to be the most significant Australian dream. But with changing lifestyles, career paths, and affordability, more Aussies are choosing to buy an investment property before buying their first home. 


They want to live close to the capital city centre where most work is, and fun happens. But living in those places comes with a hefty price. When you want to purchase property near or close to the city is becoming increasingly difficult for buyers and most especially for first home buyers. So young professionals opt to rent in their desired location and buy an investment property where they can afford but don't want to live. This sentiment created the strategy of purchasing an investment property so they can save up to buy their first home and live in their desired location. 


Young professionals have come up with the word that suits their lifestyle, "rent-investing". It allows the investor to have the flexibility of living where they want, the opportunity to travel and at the same time growing their wealth. 


When you are a tenant, and you see your friend buys the property and pays for the mortgage, the feeling for remorse is bound to kick in. Why pay for the landlord's mortgage when you can choose to pay for your own? This is a good question, especially when the interest rates are so low, and there are numerous Government schemes for first home buyers. 


If you're reading this blog, you probably are weighing your options of purchasing a property. Should you purchase your home first or an investment property? Here are some of the reasons why your rent-vesting could be the best move for you. 


1. You are financially better off


Now, when you receive rent in one hand and pays from another should leave you with similar end-result? Surprise, surprise, no. Financially, you will be better off. Tax benefits, including negative gearing and depreciation, will help you come better off. This additional saving may help you build your wealth sooner, everything being equal. It can also provide you with an excellent opportunity to build wealth through long term capital appreciation as you can practically follow the booming market for your investments.


2. Freedom of choice


For some investors, the thought of being tied to a mortgage and unable to move when you want to isn't ideal. If you are one of them, owning an investment property allows you to move and change addresses any time. Should circumstances or preferences change, rent investors also have more control over their budgets as they can upgrade or downgrade relatively easily.


3. Live the lifestyle you want 


If rental prices work for you, you can live in your dream house without needing to compromise on the location, features and your lifestyle. Rent-vesting can give you the opportunity to skip being tied down to a long term commitment mortgage to pay it off quicker. 


Things that you may want to consider


Before you adopt the rent-vesting strategy, you need to keep these things in mind:


● Have a budget and seek independent and accounting advice from experts to ensure your approach achieves your goals. 

● Understand the risks and benefits of property investing—research about the responsibilities of a landlord and illiquid nature of property investment. 

● Make sure to look out for your eligibility if you buy an investment property first in your state or territory's first homeowner grants or stamp duty concessions  

● Track your investment property's cash flow and capital growth, and always keep in mind that property investment is a long-term wealth creation strategy. 


Is rent-vesting the right move for you?


With the information we've gone through into consideration, should you buy your home or investment property first? It depends on your circumstances. So before making a decision, do your due diligence and find out which strategies work best for you. If you are unsure what options are the right ones for you, we're here to help you by giving expert advice on properties. 


Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years, and aspire to own something similar, feel free to get in touch via email at rasti@getrare.com.au or book an appointment here.


Disclaimer: This article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.