“Who the hell wants to hear actors talk?” Harry Warner (Warner Brothers), 1927. “I think there is a world market for about 5 computers.” Thomas Watson (IBM), 1943. Ridiculous right? The commonality between the two is the idea of a paradigm (an established way of thinking), and the idea that breaking the paradigm results in a hell of a change.
The modern day paradigm we examine is the notion that home ownership is only achievable by putting down a 10% deposit, and going into debt for the next 30 years. Literally becoming a slave to your mortgage.
But is there a better way? Welcome to Rentvesting!
Rentvesting is a new way of thinking about property ownership, and an excellent example of a paradigm breaker. Put simply, the Australian Taxation system rewards investment in housing. It’s far, far more affordable than what you think, providing you do it right, that is, to own property other than the one you live in.
In theory, it can actually make far more economic sense for you and a buddy to swap houses and rent to each other! If you’ve been following our blog, and seen our articles on reading the property cycle, you will know that the next phase of the market is oversupply of rental properties, putting tenants in a strong position for bargaining. You might find that you can afford to rent in a trendy suburb that you otherwise wouldn’t, especially if you were looking to buy.
While you might think that rent money is dead money, this isn’t always the case. The money saved from renting versus the money used to pay off a non-tax deductible home loan can be put towards building an investment property portfolio. You can simultaneously be a property owner, and a tenant. This makes owning your own property much more affordable. There are many areas across Australia where you can find great investment opportunities, and even at affordable prices. Some investments are as little as $100 a week!
In time your initial investment matures, and you might find that after cashing out your investments you can actually afford the property of your dreams!
Rentvesting can really make home ownership affordable, however, for many tenants, saving up for a deposit can be a significant obstacle. This is where the equity pledge comes in.
If you have a family member who owns a property, it’s possible to use their equity as a means of securing a loan. We’ve written a piece previously on the family pledge, which you can read here, but generally speaking, instead of having to pay 10 or 20%, you can find that the amount you pay up front is as little as 5%.
If your paradigm is telling you that property is unaffordable and you feel that you’d never be able to get into the property market, I encourage you to challenge your feelings, and open your mind to the creative solutions and possibilities to home ownership.
If you want to learn more, why not come along to the upcoming (and complimentary) Money Mastery event on Rentvesting. We’ll take you through how the Rentvesting process can help you, and even guide you through all of the number crunching.