In the October 2008 issue of the Australian Property Investor (API) magazine, the editor examined the reasons why investors chose to rent instead of having a mortgage over their heads for a place they would own. Personally I felt this is a very important issue, especially for non-resident Aussie property investors to understand. Under the Foreign Investment Review Board (FIRB), non-resident property investors can only buy new off-the-plan or previously unoccupied established residential homes. If resold, they can only resell their properties to Australians or permanent residents in Australia.

Lots of non-resident investors are confused whom they would be reselling to should they need to resell their investment properties in future. One group of people whom they can resell to is property investors who are seeking to increase their portfolio of investment properties. These investors, residing in Australia may be renting but are seeking to expand their portfolio with a good mix of investment properties.

Why would investors themselves rent why they could afford to possibly own a home themselves?

Well, renting gives them the flexibility to live in a suburb they may not be able to afford at this point of time. Rental for residential properties is about 4.5% to 5% but mortgage repayments prior to rate cut in Oct ‘08 are over 9% per annum. Renting needs no maintenance and hence renters need only move their furniture into the newly renovated home and start leading the lifestyle they desire from day one. Besides that, renting does not require a deposit, hence the money saved can be used to increase one’s property portfolio instead of owing a home that doesn’t gives any tax breaks. If a couple works from home, renting also allows them to gain significant tax breaks, allowing them to slice their rent and electricity bills in half and reduce their overall income tax bill. Hence renting does have its clear advantages.

I have witnessed many successful property investors who have in excess of $5million or more in their portfolio but are currently renting. My business partner, Steve is one of them. He rents a 3-bedroom unit in the Docklands along Lorimer Street in Melbourne. For many Asian investors who have acquired properties in Australia this is something they cannot come to terms with. However the reality is that this is the way and it is a common phenomenon Downunder and with concerns of recession looming, more would choose to rent instead of having a mortgage that they would have to pay themselves. So for non-resident investors, hope this is some useful information to you…