Owning a home is the ultimate goal of first time home buyers and aspirational homeowners. However, rising property prices have made it difficult for individuals to break into the property market and has led many especially first-time buyers to rentvesting. But what exactly is it?
We've talked before about why location is important in property investing. As housing near the city gets more and more challenging to buy, eager buyers who still want all the conveniences and lifestyle drivers connected to living close to town, they turn to rentvesting.
Rentvesting is a situation wherein a property investor, such as yourself, rents a property in a location where they prefer to live, and obtain the lifestyle drivers connected with it, while purchasing an investment property in a different area to lease out. This strategy is common among investors who work in the CBD but also want to invest in properties in the suburbs.
For example, if you want to live in a five-bedroom home in Sydney but couldn’t afford to buy (few could!), you can utilise rentvesting. You rent the five-bedroom home you want to live in and then buy a property in a suburb where prices are more affordable and have it tenanted.
The rental income you collect from your property in the suburbs can help you cover your own rental payments, while your investment property continues to build value through capital gains. The strategy allows you to obtain the lifestyle you want while building your own property portfolio at the same time.
Rentvesting allows you to enter the property market sooner, because you ‘re only going to pay a small deposit compared to waiting several years until you’re able to afford and pay for your dream home.
Rentvesting allows you to live the lifestyle you want and enables you to live in your dream home without the long-term commitment of a big mortgage.
Rentvesting allows you to build your wealth and your invest property portfolio. It can be useful when you want to generate wealth for you and your family.
Rentvesting provides flexibility. When you’re renting, it’s easier for you to upgrade or downgrade depending on your circumstances. It also allows you freedom if you’re not ready to settle down in a particular area.
Of course, for some people, rentvesting is counter-intuitive since you’re buying an investment property as opposed to purchasing a home you can call your own. Also, there are still some who believe that rent money is dead money. Plus, you don’t get much freedom from rentvesting. When you want to upgrade the home you're living in, you can’t just start on renovation projects since the house is not yours to begin with.
Rentvesting isn’t for everyone. It really depends on your financial circumstance and the property prices in the area you want to live in. If you do decide that it’s the right investment decision for you, it’s advisable to get professional help to make sure your purchase is the right one.
A9 Property is a team of property specialists helping first time homebuyers and property investors on their journey into the real estate market. Our weekly real estate blog touches on industry trends, market shifts and investment strategy, providing you with valuable insight on your property purchase journey. We are experts who specialise in off the plan properties – a popular investment strategy in Brisbane and Australia. Check out our carefully selected portfolio of off-market properties for sale or contact us for an obligation-free chat to discuss the best strategy to start building your portfolio.