Why every millennial should be a ‘rentvestor' Link The benefits of rentvesting come down to two main elements: cash flow (the return generated on money spent) and compound growth.
When it comes to buying your first property, Australians have two main options.
1. Purchase as an owner-occupier. In this instance, first homebuyers save up to purchase the perfect home they will live in, usually with the assistance of a home loan and 25-year mortgage.
2. Purchase as a ‘rentvestor’ (the term is a registered trademark of LJ Hooker). In this instance, first homebuyers purchase an investment property in a more affordable area while continuing to rent in their preferred suburb.
For young people unwilling (or unable) to sacrifice their inner-city lifestyles, the latter strategy of renting in the city in conjunction with an investment property portfolio allows maintaining their current lifestyle while generating long-term gains.
Given the current media interest rentvesting, it may seem like a newly-formed concept, but investors have sung this strategy’s praises for decades. In fact, it was this very strategy that enabled all the OpenCorp directors (myself included) to initially enter the property industry almost 25 years ago. It’s only in recent years we have each purchased homes as owner-occupiers
The benefits of rentvesting come down to two main elements: cash flow (the return generated on money spent) and compound growth.
Cash flow
Unlike sole owner-occupiers who generate income from their salary alone, rentvestors have two additional streams of income – rent generated from tenants living in their investment properties, and tax benefits.
Investment properties often pay for themselves in the current market, or in a worst case scenario, may cost $100 a week (about $5000 a year) after rental and tax income.
However, if the cost of holding an investment exceeds the rental income, buyers can receive tax credit by claiming these deductions, creating what’s known as ‘negative gearing.’ Negative gearing allows out of pocket investors to claim a tax deduction on their holding costs and depreciation. While negative gearing is not the primary purpose of property investment, it is an attractive benefit of modern Australian property investment.
The Property Council of Australia reports two million Australians own an investment property, with about 1.2 million using negative gearing.
In short, the costs and growth of owning an investment property (or several investment properties) while renting fare much better in the long term than purchasing a home as an owner-occupier.
Compound growth
The currently booming property market paired with Australia’s rapidly growing population means investors can be relatively confident in achieving significant compound growth. Compound growth essentially means to create growth on growth. To develop compound growth, investors must apply a system that allows buying a property, seeing growth, withdrawing the equity, then repeating this process.
By buying an investment portfolio first and creating compound growth, rentvestors can afford to buy a desirable home they want in just a few years’ time.
So why isn’t everyone doing this?
The short answer – the engrained idea of a first home being a place you live in and loves sees many potential rentvestors overlook this very viable strategy. It’s simply not how Australians have been programmed to think.
Another potential deterrent is the perceived work that goes into purchasing and renting out an investment property.
While no one is saying the initial investment purchase is easy, the long-term benefits well and truly outweigh any initial hassles.
Take risks - if you win you will become wealthy, if you lose you will become wise
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
Honestly, for young people the best move is to buy shares.
Shares earn at a higher rate historically and starting young means any dips in the market can be recovered from, it's a liquid investment you can exit out of when you are ready for a IP. The barrier to entry is very small for shares, you can start with just $500, property requires a great deal more capital and always has done.
Part of my personal strategy has been to buy shares regularly in long standing companies with a track record of high profits, and more recently ETF's. I've done this over the long term and intend on continuing right up to retirement.
Young people often don't have enough life experience to know what to buy either, and given stamp duty it can mean expensive mistakes.
Maybe if you are a dumb softcock. For the rest of us it works well.
It works well up until now, in a collapse (not saying one is a certainty) you and most on here would be f***ed hard.
As long as things don't ever change it works fine.
Btw you're a cockhead!
hoofarted
19 Apr 2016, 04:05 PM
Not really "insanely risky". There is risk everywhere but you time on your side. Inflation will deal with the rest, even if you are unlucky.
So you believe an environment where everyone has an investment property is sustainable?. Lets say we double our current scenario and have 2.5mil NG investors and around 800k PG. Is this sustainable for the economy or the actual market itself?
What you dipshits miss is that for every person who does this the burden on the tax payer becomes greater and greater, it already strips billions from the nations tax payers. The other alternative is the stay at home kids buy IP instead of OO, again you fail to see that for every person who does this its one less person renting, where does the rental income come from if everyone staying at home?
Or are we relying on those 'stupid' immigrants to come and rent out homes so we can get rich at their expense?
So you believe an environment where everyone has an investment property is sustainable?. Lets say we double our current scenario and have 2.5mil NG investors and around 800k PG. Is this sustainable for the economy or the actual market itself?
What you dipshits miss is that for every person who does this the burden on the tax payer becomes greater and greater, it already strips billions from the nations tax payers. The other alternative is the stay at home kids buy IP instead of OO, again you fail to see that for every person who does this its one less person renting, where does the rental income come from if everyone staying at home?
It doesn't strip billions from tax payers, it probably saves them money. I don't mind you being uninformed but castigating people for your own ignorance is a bit rich.
Take risks - if you win you will become wealthy, if you lose you will become wise
It doesn't strip billions from tax payers, it probably saves them money. I don't mind you being uninformed but castigating people for your own ignorance is a bit rich.
How does it save the tax payer money?
If you say because it means Government doesn’t have to expand the social housing system you will be instructed to go straight to the dunces corner.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Part of my personal strategy has been to buy shares regularly in long standing companies with a track record of high profits
Yes we all know you bought Rio and BHP and Fortescue when iron ore was $200 a tonne and then begged and spruiked for the Chinese to keep the bubble going in this forum of all places when IO dropped all the way to $40.
Yes we all know you bought Rio and BHP and Fortescue when iron ore was $200 a tonne and then begged and spruiked for the Chinese to keep the bubble going in this forum of all places when IO dropped all the way to $40.
aww... how can people be so cruel ... now you made the troll baby cry
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