crunch time

How She Did It: Why I don’t pay rent

The breakdown of how I use the income from my rental property to pay my mortgage and renting elsewhere.

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In our first instalment of How She Did It, I’m going to share with you my story on how I “technically” don’t pay rent.

For me, the desire to pay down the mortgage and save some money to start came down to having a brutal and unemotional look at my own numbers with good old pen and paper.

This led me to consider how a seachange away from the big smoke, could allow me to rent out my dream home for significantly more than I would pay in renting a property elsewhere, oh and using tax to help offset your rental costs for a home-based business also helps!

Let’s start with the numbers.

  • What it costs me in rent now: $500 per week.
  • The amount of rent I can claim as a business tax deduction: $600 – 30% = $180. Which takes my rent to $420.
  • What my investment property earns in rental income: $1200, which has already factored in real estate management fees.
  • My weekly mortgage repayments on that investment property: $700.
  • Crunch time: $1200 – $700 = $500 left to pay for my rent elsewhere.
  • But because some of my rent can be claimed as a business tax deduction, the numbers are: $500 – $420 = $80 left over to pay down existing mortgage.

None of this is rocket science, in fact using one asset to pay for its debt, and provide income is a prudent investment strategy.

But often making the decision to rent out the more expensive property can be a difficult one – especially if that property is your dream house or location.

If you’ve got a How She Did It, that you believe might help other women, let us know!

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