{"id":83401,"date":"2024-04-27T16:30:29","date_gmt":"2024-04-27T06:30:29","guid":{"rendered":"http:\/\/propertyupdate.com.au\/?p=83401"},"modified":"2024-08-04T14:44:19","modified_gmt":"2024-08-04T04:44:19","slug":"rentvesting-paving-the-way-to-prosperity","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/rentvesting-paving-the-way-to-prosperity\/","title":{"rendered":"Rentvesting \u2013 Paving the way to prosperity"},"content":{"rendered":"

More new homeowners are rejecting yesterday\u2019s sentiment of owning their own castle and buying investment properties before their own home instead.\"rentvesting\"<\/strong><\/p>\n

Driven by affordability and smart financial forecasting, Australians are investing as they\u2019re starting to see the benefit of owning rental properties as a strategic move up the property ladder.<\/p>\n

Our investors are getting younger, too<\/span><\/h2>\n

The average investor age is lower than ever at 34<\/strong>, according to the surveys.<\/p>\n

These statistics tell us two things:<\/strong><\/p>\n

    \n
  1. Young people are more switched on when it comes to real estate than any previous generation.<\/li>\n
  2. Our Millennials are not averse to putting smart property strategies ahead of the \u2018great Australian dream\u2019.<\/li>\n<\/ol>\n

    If you\u2019re amongst the growing cohort considering an investment property as your first property, you might feel \u2013 like so many others \u2013 that property prices are the factor forcing your hand.\u00a0

    <\/div><\/p>\n

    Dwelling values in several markets are rapidly outpacing wage growth, which means every year you spend saving for a deposit, the market is moving further out of reach.<\/p>\n

    It can feel a little like running on a hamster wheel.<\/strong><\/p>\n

    Rentvesting<\/strong> is a smart property acquisition strategy that gives first-time property buyers the opportunity to buy sooner rather than later.<\/p>\n

    It\u2019s a lifeline for those who are trying to gain a foothold in a property market that\u2019s essentially a moving target.<\/p>\n

    Rentvesting is a paradigm shift away from the traditional idea of the \u2018white picket fence\u2019 house. <\/strong><\/p>\n

    We\u2019ve been brought up with the idea that we should buy our own home first.<\/p>\n

    But in today\u2019s property climate \u2013 where house prices are rising at record-breaking rates \u2013 what used to work is no longer an easy option.<\/p>\n

    Rentvesting, therefore, is a strategy that saves people from being renters their entire life.<\/p>\n

    It gives struggling first homebuyers an opportunity to enter the market \u2013 even if they\u2019re not buying the home for themselves.<\/p>\n

    How rentvesting works<\/span><\/h2>\n

    Essentially, the rent and investment strategy is to buy an investment property<\/a> first (where you can afford to buy) and rent where you want to live (but probably can't afford to.)<\/p>\n

    It\u2019s a tactic that overcomes financial obstacles and exorbitant property prices because you can buy in a location that fits your budget and then rent in a location that suits your lifestyle.<\/p>\n

    It works because even though you\u2019re renting, the property you buy is an asset that\u2019s growing in value (assuming you choose a smart location) and being (in part) paid off by your tenant.<\/p>\n

    Not only that, but you\u2019re gaining equity that can launch you into other property purchases down the track, including (when the time is right) a home to call your own.<\/p>\n

    Who needs rentvesting?<\/span><\/h2>\n

    If you live in regional or outlying suburbs, affordability may not be a problem.\u00a0\"location<\/p>\n

    However, rentvesting is a particularly helpful strategy for those who are required to or want to live near our more expensive cities.<\/p>\n

    Our capital cities are now booming economic hubs that command high prices due to land-locked supply and increasing demand from the many people who like the lifestyle and amenities afforded by these locations.<\/p>\n

    As such, many white-collar workers \u2013 particularly Millennials who make up a high proportion of middle-income employees \u2013 face few choices if the inner suburbs are too costly.<\/p>\n

    They can buy in a less expensive outer fringe suburb and live with a ghastly commute, or they can rent closer in.<\/p>\n

    \"pencil<\/picture><\/span>

    Note: <\/span> Rentvesting is the one time that low yields work in the investor\u2019s favour. <\/p><\/div><\/div><\/strong><\/p>\n

    City rental markets haven\u2019t yet caught up with accelerated prices.<\/p>\n

    For example, while the median price for a unit in Sydney is in the high $700,000s,\u00a0 the yield is only around 3.5%.<\/p><\/blockquote>\n

    With a rentvesting strategy, you would buy your investment property in a high capital growth area further from the city, and you'd be able to take advantage of the lower asking rents in the city, or, if you prefer, an enviable lifestyle location you wouldn\u2019t normally be able to afford\u00a0to buy.<\/p>\n

    For a quick rent versus purchase example, let\u2019s say you wanted to buy a house in a middle-ring Melbourne suburb, where the average home is $800,000.<\/p>\n

    Assuming a 20% deposit (which in this case would be $160,000) and a 5% interest rate, the mortgage repayments would be around $880 per week (principal and interest).<\/p>\n

    On the other hand, the average rent for a house in the same market is only $500.<\/strong><\/p>\n

    And of course, that scenario assumes you can amass a deposit of that size.<\/p>\n

    A smaller deposit will attract Lenders' Mortgage Insurance, which will bump up the repayments further.<\/p>\n

    Now we can see how first homebuyers choose to purchase an affordable, risk-averse, high-growth property and still live in their preferred location at a rent that would be lower than owning a property in that location.<\/p>\n

    It\u2019s not just for the financially challenged.\"calculator <\/strong><\/p>\n

    Lifestyle seekers can benefit from rentvesting too.<\/p>\n

    You see\u2026money isn\u2019t always the motive behind buying an investment property first, rentvesting also helps those who:<\/p>\n