The Pros and Cons of Rentvesting

The Pros and Cons of Rentvesting

With the sharp rise in property prices in recent years a new trend has emerged called "rentvesting". It is the process of renting a property that you want to live in while buying a property that’s more affordable. For example, you will rent out your dream home and then buy a home located in an area where prices are lower. This is a solution for those who want to own a property despite the increasing prices in the market. 

But just like everything else, rentvesting comes with its share of pros and cons. In this article, let’s take a look at the advantages and drawbacks of rentvesting: 

Advantages

  • Enter the real estate market sooner. It may take years before you can save enough money to buy your dream home. But with rentvesting, you can enter the property market sooner and with a smaller deposit. 
  • It opens up an opportunity to earn more. This can actually be an additional source of income, provided that your rental income from the investment property is more than your loan repayments. You can use this extra money to get out of debt or make additional repayments to your loan so you can pay off your mortgage sooner than expected.
  • You have the option to live wherever you want. Rentvesting enables you to choose where you live, depending on your preferred lifestyle. Not only will you be able to buy a property that you can afford, you can also live in a house that’s close to the beach, your office, or your kids’ school.

Disadvantages

  • Renting is temporary. The flexibility of being able to live where you want can also be a disadvantage in the sense that you don’t own the property and it will never be permanent. 
  • There are restrictions on home improvements. Living in a rental property means you cannot make it your own. You will not be able to make the changes that you want in its interior design, etc. 
  • You’re buying an investment property first. For some people, buying a property as an investment may be hard to comprehend as purchasing your own home is usually the first step when entering the market.
  • Rent money is dead money. It’s an old saying that still holds true today and can be a turn-off for people who are interested in rentvesting. 
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