AustraliaIndustryInformativePropertyRentvestingStamp Duty

Rentvesting: Owning Investment Property vs First-Home Stamp Duty Concessions



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The Australian housing market is incredibly active. Every month people are constantly buying and selling, trying to get the best deals available for their property and property ownership dreams. Even more who have yet to get into the housing market are trying to keep track of the available opportunities, hoping for that rare chance at an affordable home located near where they actually want to live. The fact of the matter is that most non-apartment homes for sale at prices first-time buyers can afford are far from the city centres where people prefer to live, work, and go to school.

The vast majority of people looking to get into the housing market already have a career they can’t leave and a life built in or near a major city, but they still want to become property owners and begin building equity. This has led to busy professionals with good credit and downpayment money ready engaging in a practice known as Rentvesting.

What is Rentvesting?

Rentvesting or Rent-Investing is a way for someone to live in the city while owning and managing property that is out in the boonies. These young people who are ready to buy property but unable to buy property where they want to live continue to rent a residence in their desired location and rent out their purchased home to tenants in order to pay the mortgage, gain equity, and possibly bring in a little passive income. In fact, this process works so well that some people own multiple rental properties without actually living in a home that they own!

Rentvesting is a fantastic way to improve your personal financial situation, get into the housing market, and continue your professional life in the city, but it also means that your first property doesn’t qualify for the first-home stamp duty concession in places where it’s available. However, this also means that that one-time concession is left unclaimed.

The Stamp Duty Concession

When you buy a residence in Australia, the government asks you to pay a percentage of the sale price in a tax known as the stamp duty. This pays for a number of municipal maintenance tasks that keep the neighbourhoods around your property in good quality. While many real estate costs are variable based on the agreement between the buyer and seller, the stamp duty is one of the most inescapable parts of any property ownership transfer. Even property given as a gift incurs a stamp duty.

However, the government also wants to encourage people to buy and live in their own homes rather than renting, and they understand that steep additional costs are a deterrent to young families looking to buy their first home. This is why many of the Australian states provide a stamp duty concession to people buying their first home. Sometimes this is a discount while at other times it is a full exemption.

Settling Down After Rentvesting – And Claiming Your Concession

What you may not have realized when forgoing the stamp duty concession on your first rental property is that the concession is still available to you. The government wants you to live in your own home, so the rentvester’s first purchase of a primary residence is still exactly what they’re looking to incentivize. This means that you are still eligible for your stamp duty concession even if you own multiple properties that are rented out to other families! Now all you have to do is find a nice home in an area convenient to your career and in a state that offers first-home stamp duty concessions (not SA). Sure, that’s a pretty tall order, but if you ever do find the ideal property, settle on a strata title apartment, or save up for a high priced city home, you’ll be able to save several thousand dollars in stamp duty simply by being ready.

The key is to know that you’re still eligible so that you and your lawyer can apply for the exemption at the correct point in your buying process. In fact, you’re not actually limited to a concession just on apartments and already constructed houses. Most states offer a special first-home grant for buyers who purchase a newly constructed home or build a new home for themselves. If you are going to build your own home, you can use the stamp duty concession when you buy the empty land then acquire the grant for building the home itself.

The Future is Bright for Rentvesters

If you or someone you know has been rentvesting for a while and is thinking again about buying home for your personal residence, the future is looking bright. Owning homes as investment property doesn’t actually mean that you’ve been a ‘homeowner’ in the eyes of the government, so you still qualify for all the benefits offered to first-time homeowners! While these benefits may vary from state to state, there is usually some kind of incentive program, especially if you’re buying or building a brand new residence.

The housing market may be tight, but current policies are incredibly helpful for both acquiring investment property and finally settling down in your very own home. At least you’re already experienced in the housing industry so you already know what to expect from the home buying process.

Happy house hunting! And remember, if you ever need any help, Titlexchange is the place to go!