Ever dreamed of living in your ideal location without breaking the bank? Rentvesting could be the game-changer you’ve been looking for. Property expert Lakhwinder Singh reveals how this innovative strategy lets you rent where you love and invest where you’ll grow—balancing lifestyle and financial success. In an interview with The Indian Sun, Singh, the owner of Value Buyers, shares his insights on rentvesting.
What exactly is rentvesting, and how does it differ from traditional homeownership?
Rentvesting is a property investment strategy where individuals rent a home in a location they prefer to live while purchasing an investment property elsewhere, often in an area that aligns better with their financial goals or investment potential.
Traditional Homeownership:
Traditional homeownership has become increasingly difficult due to the very high property prices compared to their wages, especially in capital cities like Sydney and Melbourne. First-home buyers face challenges such as being unable to find a suitable home within their price range, often leading them to wait. However, this approach is counterproductive as property prices tend to rise faster than they can save for a larger deposit. Alternatively, some first-home buyers end up purchasing high-rise apartments, which often experience minimal price growth and come with high strata or body corporate fees.
What are the key benefits of rentvesting?
One of the key benefits is that they don’t have to live in a compromised house, as they can rent a much larger home in a location they prefer while simultaneously investing in property markets where the entry price is much lower. These properties can meet the fundamentals of a growth asset, such as having a high land-to-asset ratio, strong cash flow or rental yield, and being easier to hold financially. This allows home buyers to maintain their usual lifestyle, unlike others who take on huge mortgages and often struggle to find time to relax and enjoy the property they purchased
Can you explain the financial advantages of rentvesting, particularly in terms of investment returns and tax benefits?
- Advantages
Rentvestors can maximise ROI by buying in areas that are primed for growth. The Australian property market is not a single market; it consists of multiple markets within markets. While one market might experience high growth, another could be stagnant. Additionally, markets that have recently experienced high growth often slow down to revert to the mean. A smart investor can take advantage of these cycles to build wealth, which is only possible when investing borderless, rather than limiting investments to your local area. - Tax Benefits
When you are rentvesting, 100 percent of your debt becomes tax-deductible, and all property portfolio expenses are also tax-deductible. This allows you to build wealth through tax savings, property growth across your portfolio, and the reduction of your debt’s real value due to inflation. As a rentvestor, you become a wealth-building machine
Are there any common pitfalls or risks that potential rentvestors should be aware of?
Just like any investment, understanding numbers and cash flow is very important. When making investments, one should evaluate both the best-case scenario and the worst-case scenario by analyzing the historical performance of the asset they are considering.
A common pitfall is that many people suffer from “shiny object syndrome,” where they are drawn to someone who only highlights the positives or, in other words, someone who wraps the same gift more attractively without improving its substance. It is crucial to seek advice from someone who can present the real numbers and emphasize the importance of building wealth gradually. True wealth is built slowly over time.
When investing in property, it is essential to consider key data points such as building approvals in the area, the availability of developable land, vacancy rate trends, market timing, potential unexpected expenses, tax implications, and cash flow.
How does rentvesting fit into a broader financial strategy, especially for first-time property investors?
Rentvesting can be used as a strategy to build wealth by strategically making investments while continuing to live in areas where it might be unaffordable to buy.
It can also serve as a stepping stone to your dream house. Instead of waiting to save a larger deposit, one can invest a smaller deposit in a lower-value market that is expected to grow at a higher rate. This approach can accelerate the journey toward owning your dream home and prevents the feeling of missing out when everyone is talking about how the property market is becoming increasingly unaffordable.
What factors should someone consider when choosing a property to rent versus one to invest in?
When choosing to rent, it can be a lifestyle choice and depends on what matters most to the individual.
However, when choosing to invest, it is important to look for a market that aligns with your cash flow requirements and offers a balance between cash flow and growth to meet individual goals and objectives.
There are multiple strategies in property investment, such as ‘buy and hold,’ renovation, subdivision, retain and build, development, etc. Each strategy comes with its own risks and rewards. Starting with a simple buy-and-hold strategy could be the best option for most beginners, while experienced investors may find engaging in more advanced strategies a better use of their time and money
With the current state of the real estate market, do you think rentvesting is a viable long-term strategy?
Hundred per cent rentvesting is even more relevant in today’s high-interest-rate environment, as taking on a large mortgage to buy a dream home has become impossible for the average 9-to-5 worker. However, saving a smaller deposit and investing in lower-value markets with good rental returns is still possible and is often the only option for most people who don’t want to experience the feeling of missing out in this inflationary market.
What advice would you give to someone considering rentvesting for the first time?
Work out your numbers and have a long-term plan in mind. It is possible to build a much larger property portfolio if you dedicate time to proper planning. Don’t hesitate to reach out to someone who can guide you and help develop a solid strategy. If your numbers don’t work on paper, they won’t work in reality either.
I built my portfolio on a modest income, and it is proof that anyone with the right mindset can achieve similar or even better results.
How do you see the future of rentvesting evolving with changes in the housing market and the economy?
The future of rentvesting is likely to evolve in response to ongoing changes in the housing market and broader economic conditions.
As housing prices continue to rise in many urban areas, rentvesting may become an increasingly attractive option for those who wish to live in desirable locations while still building wealth through property investments in more affordable markets.
High interest rates and inflation could further push people toward rentvesting as a viable alternative to owning a home outright in expensive cities. The rise of remote work and hybrid models is allowing people to live farther from their workplaces
Improved access to data and property analytics will make it easier for rentvestors to identify promising markets and manage their investments. Online platforms offering investment property insights, tools for cash flow analysis, and virtual property tours will continue to empower investors.
Younger generations, who prioritise experiences and flexibility over traditional homeownership, are likely to embrace rentvesting as a way to balance lifestyle aspirations with wealth-building goals.
As sustainability becomes a more prominent consideration, rentvestors may start focusing on properties with eco-friendly features, both as a lifestyle choice and as a strategy to attract environmentally conscious tenants.
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