Rentvesting Advice

1) That is 100% NOT tax deductible! Where did you read that?
2) I was in a similar position savings wise when I first started investing, I was a pizza delivery driver and managed to get 14 properties. The key is to save hard and invest harder, make sure the investment property is below value, create sweat equity and have strong cash flow.

I’d look at taking advantage of LMI. Less money down and what you would have used as the deposit put into an offset account against the loan. Makes it easier to save for the 2nd, 3rd etc deposits.

Hi Anthony,

Hmm, this has the aroma of similarity about it :-

1) I’ve been told that rent I pay to a landlord is tax deductible – I can’t find a single shred of info to prove this though, do I smell a porky?

This smacks a little bit of a plan where someone with their own home chooses to go and rent instead. Though the rent they pay is NOT Tax Deductible, the rent they then receive on their PPOR (now an investment Property) IS. It works out that the new IP is effectively “paying” their own rent (depending on any mortgage payments due on the PPOR – if there is cash left over after paying any mortgage….).

Further, depending on available Equity in their PPOR, they might also be able to borrow to buy ANOTHER IP as well. Thus the beginnings of a portfolio. And, if the rent they pay is minimal (i.e. moving in with Mum and Dad for a bit) then this can only accelerate their way along the path.

Now, I have never heard of the term “Rentvesting” – but the above sounds like it could be that.

I did know one or two people who NEVER owned a home – instead they always rented, but had a portfolio of properties and shares. They believed it was WAY cheaper than owning their own home. Could THAT be rentvesting?

One final thought – could it be that you were reading an American book when you found the term, and the strategy? Their laws are way different in many ways – could having one’s Personal rent being a Tax deduction be one of these differences?

Benny

Benny wrote:

I’m a little up in the air about LMI at the moment, I can definitely see the many benefits, however having a 20% equity buffer if the property were to depreciate would help me sleep a little better at night. Happy to be convinced otherwise!!

Did you catch this post, Anthony?https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4996934
That goes into the whys and wherefores of LMI and should hold some positive reasons for using LMI. Consider that you can choose to hold any of the Deposit you DIDN’T have to pay in an Offset account as your SAN (Sleep At Night) security blanket.
e.g. Don’t pay a 20% Deposit ($80k on a $400k purchase). Instead, pay $40k plus maybe $5k of LMI (a guess) – this leaves $35k that can sit in your Offset. The interest on it should more than cover the interest on the $5k of LMI, AND you have funds available if the bad times come (or another bargain……)
Benny

Benny has nailed it! The money is still there for emergencies/next deposit in the offset reducing interest plus the LMI is deductible.

And scarily enough I was told that idea by a friend of a friend at a dinner – they were going to try and claim their own rent too – not sure what dodgy stuff they’re up to!

Thinking more about this, when I worked in Sydney (my home in Brisbane) I had joined up with an employment agency who found that I could effectively claim LAHA (Living Away from Home Allowance) as my home was 1000Km away. In my case, I found their way of doing things had me paying less Tax, but also it meant my Taxable Income was greatly reduced – meaning I couldn’t borrow as easily for IP’s. Technically my living costs were being treated as an expense allowance rather than a deduction.

I didn’t stay with them long – the negatives far outweighed the positives for me. Perhaps that IS a legal way to save on rent though?

Benny

Benny wrote:

Hi Tony, Hmm, your story sounds mighty like another bloke featured elsewhere in here :-https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977
Was your story similar? It sounds like it might have been. Where were you investing? I’d love to read your story…. Have you posted it somewhere?

Hi Benny yeah similar story just had a strong savings plan and started buying under value properties, renovating and renting so strong cash flow and equity to just keeping pushing on. I’ve invested mainly in Sydney, Regional NSW and SA at the moment.

My latest media was
http://www.dailymail.co.uk/news/article-3832798/Sydney-investor-Tony-Fleming-owns-14-properties-working-Domino-s-Pizza-ten-years.html

Anthony Zanatta wrote:

1) I’ve been told that rent I pay to a landlord is tax deductible – I can’t find a single shred of info to prove this though, do I smell a porky?

Its a Porky Pie!
Or perhaps a half truth. Rent would only be deductible if it relates to the production of assessable income – such as operating a business from home (not a home office) and then it would need to be apportioned.

Thanks guys. Yeah the comments are an eye opener about how people perceive property investors or people trying to better their lives.