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The pros and cons of ‘rentvesting’

by ShelMarkblog In Uncategorized

16 February 2019

If you have been following our newsletters lately you would probably have noticed the term ‘rentvesting’ in recent newsletters. It’s not a term we made up but a buzzword for an alternative way of getting into the property market and achieving property ownership.

So what is rentvesting?

Rentvesting is simply renting where you want to live (typically in an area you love but can’t afford to buy in) and buying an investment property in a more affordable suburb to rent out.

Just like any investment strategy, there are pros and cons that should be considered.

THE PROS

Live where you want, while still getting your foot in the door of the property market

Rentvesting allows you to live where you want to live and invest where you can afford, enabling you to get into the property market sooner using a lower deposit.

Freedom and flexibility

Let’s face it, when you’re young, perhaps without any kids, the ability to move around as you please is very desirable. This could be to a different suburb, state or even country. Renting allows you to do that (within the terms of your lease of course).

Tax incentives 

Property investors have the benefit of being able to tap into numerous tax benefits, which aren’t available to owner occupiers. Tax deductible expenses include advertising for tenants, repairs and maintenance, home insurance, and water and council rates.

The opportunity to build an investment portfolio

If the rent being paid by your tenants is more than your loan repayments, you will benefit from extra income. This could enable you to reinvest these extra funds elsewhere and use it to grow your property portfolio at a much faster pace than if you were waiting for a property to appreciate in capital growth.

THE CONS

Being a tenant 

A rentvester is in the unusual situation of being both a tenant and a landlord. As a tenant you must deal with regular inspections and the uncertainty of having to move should the owner decide to sell. Furthermore, as your home is not your own, there are restrictions on what you can and can’t do to it to make it how you want it to be. If you are looking for a long term permanent home for the security, then rentvesting would not be for you.

Paying off someone else’s mortgage 

Many people refer to rent money as ‘dead money’ because it is essentially helping the landlord pay off their mortgage. If you can’t bear this thought then reconsider rentvesting. The whole premise behind it is to live where you want to live and buy where you can afford, so it requires a change in mindset.

Time consuming 

Being a tenant and a landlord simultaneously can be time consuming. Having a good property manager will make it much easier and far less stressful.

You will miss out on the FHOG

The First Home Owner Grant (FHOG) is only available to first homebuyers who are buying an established or building a new home to live in themselves. So if the first property you buy is an investment property you will forfeit your eligibility for the grant. Click here for more information on the FHOG eligibility requirements in WA.

You may be up for Capital Gains Tax

When you sell your investment property, you will have to pay Capital Gains Tax (CGT) on the profit margin unless you live in the property for 12 months before selling it.

How to rentvest successfully

Successful rentvesting requires you to do some research before you jump in. Analyse the average rental returns and capital growth predictions of a median priced investment property in a suburb you are considering investing in.

Once you’ve done that, compare this to the rental returns and capital growth of the property you want to live in/rent (in the more expensive area).

If the sums and lifestyle advantages don’t add up, reconsider the idea of rentvesting. But if you love where you live and want the freedom and flexibility to move around before you settle down without sacrificing the chance to get your foot in the door of the property market, give rentvesting some serious consideration.

Everyone’s financial situation is unique

Always seek independent financial advice before making a decision of this magnitude.


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How to stay cool without blowing out your power bill

by ShelMarkblog In Uncategorized

08 February 2019

As we swelter through another heat wave in Perth, it may be very tempting to crank up the air conditioner or head to the nearest cinema or shopping centre.

So when we saw an article on how to keep cool without ramping up your power bill written by an experienced building designer with a Masters degree in sustainable design it caught our attention.

He says there are a number of measures we can all take to reduce the internal temperature of our homes at various times of the day to the point where the need for air conditioning will be reduced, saving money.

His number one tip is to protect your home from the sun during the hottest part of the day.

Lower temperatures in the home at the start and end of the day by opening all doors and windows, using cross ventilation to draw a breeze through.

Then, as the mercury rises, close all the openings and window treatments (as a lot of heat transference comes via glass windows) to reduce radiant heat from entering.

Block-out shutters or external venetians are great options but if you don’t have the budget to retrofit your windows you can simply call in to your local nursery and invest in a small tree with a good-sized canopy to plant near your windows to the east and west of your home.

There should be no need to run your air conditioner well into the evening when the temperatures have dropped by ten to fifteen degrees. Reducing the running time of your air conditioning by as little as an hour a day will result in a significant saving on your power bill at the end of the quarter.

Furthermore, opening your windows to let fresh air in will also improve indoor air quality, which is particularly important for people with allergies and respiratory conditions like asthma.

If you intend to make some structural changes to your home to make it more sustainable, here are a few tips:

• Install louvred widows to the southern and northern ends of the house. Given hot air rises, this feature will expel hot air and draw cool air in.
• Minimise the use of brick and concrete externally as they are very effective at storing heat.
• Soft, cool landscape features such as a pool, water feature, timber decking and soft soil gardens are excellent for combatting heat transference.
• Wall and ceiling insulation is a must, especially in hotter areas (the higher the R-value rating, the more heat resistant the insulation).

Stay cool. Autumn is just around the corner.


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Chinese New Year facts & what the Year of the Pig represents

by ShelMarkblog In Uncategorized

01 February 2019

With Chinese New Year approaching next week (Feb 5) we thought it would be interesting to share some facts about this festival that marks the beginning of a new year on the traditional Chinese calendar.

In 2019 we farewell the Year of the Dog and enter the Year of the Pig, which is the last in line of all 12 zodiac animals.

The Pig is said to be a lucky animal representing carefree fun, good fortune and wealth. Water zodiac signs (Cancer, Scorpio and Pisces) are predicted to have the most success in the Year of the Pig 2019 (according to the Chinese zodiac).

Those born under the sign of the Pig are said to be natural nurturers and have gentle, accommodating personalities. However their weakness is that they can be somewhat naive and overly sensitive.

Random facts about Chinese New Year

1. It is thought that the most fireworks in the world are set off that night.

2. There are 12 zodiac animals and each year is represented by one of those animals on a rotational basis – rat, ox, tiger, rabbit, dragon, snake, horse, goat, monkey, rooster, dog and pig.

3. Your own zodiac year is considered your least fortunate.

4. The colour red is said to defend against misfortune, hence the prominence of the colour during celebrations and in the homes of Chinese families.

5. Approximately one-sixth of the world’s population celebrates the Chinese New Year.

6. Celebrations last for a few weeks and typically culminate in a Lantern Festival, which falls on the first full moon of the Chinese New Year (aka the Lunar New Year or Spring Festival)

7. It is tradition for families to exchange gifts of cash on Chinese New Year while the streets are filled the sounds of bells ringing and fireworks and the sights of lion dances being performed.


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