AFFORDABLE HOUSING
The best approach, in my view, is to purchase an investment property through a company with the shares held in a Holdings Trust and rent it from that entity. This allows you to combine the benefits of renting and owning while creating long-term wealth.
• Increased Net Rental Yield: Renting from your investment entity boosts returns by saving on management fees and generating rental income from additional units.
• Reduced Vacancy Risks: Living in the main unit ensures at least one occupied space, while tenants in other units provide reliable cash flow.
• Capital Efficiency with Renting: Renting in expensive areas frees up funds for higher-yield investment properties, avoiding tying up capital in non-income-generating homes.
Additionally, having multiple rental units on the property— such as a house with cottages or apartments— can provide you with rental income even while you live in the main house. Let’ s explore how this works and why it may be a winning strategy.
The Case for Renting from Your Investment Entity Owning a property through a company with shares held in a Holdings Trust opens up numerous benefits. Renting the property from this entity while living in it, particularly if it has multiple units, offers unique advantages:
1. Increased Net Rental Yield When you manage the property yourself, you save on rental commissions and other management fees. This improves the net rental yield and enhances your overall return on investment. Additionally, having tenants in the additional units on your property creates a steady stream of income to offset your living expenses.
2. Reduced Vacancy and Default Risks Living in the main house of your investment property removes the risk of vacancies and defaults for at least one unit— the one you occupy. Meanwhile, the tenants in the other units provide regular rental income. This setup allows you to plan your finances effectively while benefiting from immediate cash flow.
3. Opportunities for Value-Adding Renovations As the owner-occupier of the main unit, you can renovate the property to enhance its overall appeal and value. These upgrades benefit not only your living experience but also the property’ s market value. The improvements can lead to increased rental income for the other units, ensuring long-term profitability.
By adopting this approach, you can live in a home you enjoy while turning the additional units into income-generating assets. It’ s a practical way to achieve both lifestyle and financial goals.
56 REI MAGAZINE DECEMBER 2024 / JANUARY 2025