RENTVESTING.. What is it? And what are the benefits?

 

To rent or buy? That is the question that many home buyers are currently facing. With property prices continuing to go through the roof, it is becoming more difficult for buyers to break into the housing market. That’s where rentvesting comes into play. It’s a whole new world in today’s modern culture, but it also highlights a revolution in home buying strategy, especially for first home buyers and those struggling to move up the property ladder. But what is it? And what are the benefits?

What is ‘rentvesting’?

It’s no secret that purchasing a property in today’s housing climate is becoming increasingly difficult, especially for first home buyers. With property prices growing by as much as 13% each year, or even higher in dominant markets such as Sydney and Melbourne, the struggle to save up a deposit is becoming tougher. With the market increasing at such a rapid pace it seems that the longer you wait to purchase a property, the harder it may become to save for a deposit.

The location of purchasing a property is one of the key players for a home buyer. Work, family and lifestyle are all fundamental aspects that impact a customer’s decision on location. However, for many people, being able to afford to buy a home in their desired location is becoming more of a challenge. In fact, accommodating all those fundamental aspects may be completely out of the question.

Rentvesting is a new buying strategy that has recently emerged in response to these issues. You could almost say it is a stepping stone approach to purchasing your desired home. Rentvestors typically buy a property that meets their budget at a location they can afford, then rent a home in an area where they would prefer to live and work. Renting in an attractive location is frequently more affordable than buying, and this basic financial fundamental is what’s behind the rentvesting revolution.

A rentvestor doesn’t necessarily have to rent a property, in fact, many rentvestors are typically living at home with their parents to reduce their living expenses while saving up a deposit for buying a property. These savvy buyers may continue to live at home with their parents even after they’ve bought their first property, and maybe even after they’ve purchased their second.

What are the benefits of ‘rentvesting’?

The major advantage of the rentvesting strategy is that it allows you to get into the property market quicker. The sooner someone enters the housing market, the sooner the property can begin to generate capital gains and the sooner you can start to accrue wealth.
The advantage of this approach is that in a rising market, you may soon have equity you can use to purchase another property that’s also in an affordable area. Again it may not be a home you want to live in, but you’ll have two properties building equity as home values rise (potentially), two sets of tenants paying your mortgages for you, and considerable tax advantages as well.
Additionally, rentvesting provides flexibility. If your circumstances happen to change, it is easy to pack up and move, without the hassle of stamp duty expenses or legal costs. Rentvesting also gives you the ability to move around if you aren’t ready to put down permanent roots in a particular location.

Purchasing an investment property first allows you to save for your dream home as well as not having to compromise on location when you are ready to purchase your home. This can also mean you can make investments that may return you the greatest capital gains. You can restrict your property searches to properties that meet your buying criteria of location, affordability and the potential for capital growth – a luxury that most owner-occupier first home buyers don’t have.

With rentvesting, it is essential to do your research on the property that needs to deliver consistent income and steady capital growth.
To succeed, you first need to choose a location that provides capital growth potential, then consider what is available within that are and choose a home that best meets your needs.

As your broker, we’re here to help you assess your financial position and work out what you can afford to invest. We can also provide you with property market data that could give you the edge when selecting the right property for your goals.
For more information about rentvesting, contact us today. We’ll be happy to help you start rentvesting if it’s the right solution for you.

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