Eager to enter the property market but can’t afford to buy where you want to live? It might be time to consider rentvesting.
With headlines in the media often touting rising living costs and housing unaffordability, it is no surprise that many young people feel like it is impossible to enter the property market. While entering the market has become more difficult in the last few years, it certainly isn’t impossible – you just have to think outside of the box. Enter rentvesting:
So what is rentvesting?
Rentvesting refers to purchasing an investment property while continuing to rent in your desired location. Young home buyers often do not want to give up their inner city lifestyles, yet they cannot afford to purchase in their desired area. Rentvesting is great option for young people to retain their lifestyle they have become accustomed to, while still having the opportunity to enter the market.
What are the benefits?
Rentvesting offers young people an option to enter the market sooner. Rather than waiting for years to afford your dream home, rentvesting gives you the option to break into the market faster, often with a smaller deposit and before price increases. It also gives young people the opportunity to start building wealth from an early age – the equity gained over time in the investment property will make it easier for you to purchase again in the future.
The type of investment properties that rentvestors tend to purchase often lie in the outer-ring suburbs. Properties in these areas tend to be more affordable while still producing healthy to strong yields. Generally speaking, this allows the property to be cash flow positive or close to it. This means little out-of-pocket expenses and less financial impact on your lifestyle.
Rentvestors can also take advantage of tax benefits such as depreciation and negative gearing to help aggressively pay down debt in the first few years of ownership.
Another benefit of rentvesting is that you are not limited to a certain location – the sky is the limit! For example, many young people that live in either Sydney or Melbourne choose to purchase interstate as they have been priced out of their local markets.
What should I consider?
As with any property purchase, it’s important to assess your individual circumstances and needs prior to becoming a rentvestor. Make sure to seek independent advice in regards to finances and conduct adequate research into an area that you are considering investing in.
If planned and executed correctly, rentvesting is a great option for young people to consider as a way to enter the market.