Many aspiring homeowners cannot afford to buy a home where they want, especially in expensive inner cities. So, they’re turning to a new concept: rentvesting. It’s a clever way to enter the property market and start building personal wealth, giving you the freedom of renting coupled with the financial benefits of homeownership.
Rentvesting means renting a home where you want to live while buying an investment home somewhere else. While it may seem ironic, rentvesting can make sense. You rent a home where you can’t afford to buy, and then charge rent on a nice, less expensive property in the suburbs or a nearby town. The trick is to buy a home that’s right for your budget so you can earn a profit. Take the profit and save it, spend it to lower your rent, or best of all, reinvest it into your rental property so you can pay off your mortgage faster and build equity.
Of course, there are pros and cons. Some things to consider:
- You can live wherever you want
- You can buy a home anywhere you want
- As a homeowner, you can deduct the interest on your loan, depreciate the property, manage property expenses, and more. However, as a renter, you do not receive these tax benefits
- You can increase the rent on your property, but your rent payments may also increase
- You aren’t responsible for maintenance when you rent, but you’ll be responsible as a landlord.
Ask your Berkshire Hathaway HomeServices network professional to help you become a rentvestor.