RENTVESTING: the new strategy for your investments!
As property prices continue to skyrocket, buying in a centrally located or popular area is basically out of reach for the average working millennial. As an alternative, many opt to rent rather than buy. But what if we told you that there is a way to do both? Rent and buy.
Rentvesting is a relatively new term that continuous to increase in popularity, especially over the past decade as millennials step foot into the property market.
Rentvesting is a home-owning strategy where you purchase a property for investment purposes in an affordable location and rent in a property in an area that best suits your lifestyle. This allows you to enter the property market sooner with a smaller deposit as opposed to waiting long years to afford your dream home. This wealth creation strategy is prevalent among the younger generation as it allows flexibility and therefore can be a better fit in comparison to being an owner-occupier.
“Millennials aren’t interested in purchasing a home in the outer suburbs and then having to commute into the CBD,” says MFAA accredited mortgage broker Gracious Chidhakwa. Rentvesting allows your rental income to cover the mortgage expenses, so you can keep living the lifestyle you want without it costing you your lifestyle.
For this strategy to be successful, you must be a good saver and focus on delayed gratification. It is all about living within your means. Don’t spend big at the start while you’re building it up. Step away from the mentality of negative gearing and tax minimisation and buy neutrally, or ideally. A positively geared property can provide higher rental yields.
Though this new strategy can be foreign in comparison to the ‘great Australian dream’ of buying a home on a large block of land and solely paying it off as fast as possible in the hope to live debt-free, rentvesting is quite the opposite and can encourage a healthy debt as long you stick to your budget and keep using the money to invest further.
A recent Mortgage Choice survey highlighted an increase in ‘rentvesting’ from 21 per cent of investors to 37 per cent over the past twelve months alone. But while this strategy may appear ideal to many, it’s not suited to everybody.
If you have any further questions or would like to know more about rentvesting, contact us on (03) 90786431 and we’ll be happy to help.