What is Rentvesting?
The thought of moving 30mins or even an hour away from where you grew up or are already established can be very daunting for some, even more so now as houses are getting more and more difficult to buy closer into the city.
What is Rentvesting?
You may have seen ‘Rentvesting’ mentioned on the news or in the paper but don’t entirely understand what it is. Rentvesting is a strategy that has started to gain traction in the last few years especially as we see property prices soar and affordability for First Home Buyers becoming less achievable. With many Aussies too fixated on saving for their dream first home they don’t realise that the properties in that area are rising fast than they can save.
Rentvesting involves renting a property at your desired location and buying at where it is most affordable, this purchased property is then rented out to help repay that mortgage. You may find that the difference in rent paid at your desired location vs the rent being paid to you is not that much of a difference.
Why should we Rentvest?
One of the obvious reasons to Rentvest is to enter in the Housing Market sooner rather than later, but there are other benefits to going down the Rentvesting path. House prices on the outer suburbs are a lot cheaper which means the deposit needed will be lower, this may cut a few years of saving the deposit for the desired home. While entering the Market sooner you are able to start building wealth as an investor and see the capital growth sooner while you are living at your desired location.
As the equity grows in your investment property, you may still consider staying in the desired rented property and look leveraging the equity and buying a 2nd investment property. By having two Investment properties you will have two seperate tenants paying off your mortgages and potentially two properties with capital growth.
By buying an investment property first, this means you don’t have to compromise on location and lifestyle while still being able to enjoy the benefits of property ownership.
Things to consider before Rentvesting
Think like an investor not a home buyer, what we are saying is don’t get personally attached to the investment you are going to buy. When buying an investment property a lot of people fall in the trap of ‘would I live in it?’ and being very picky with what they buy. This may delay the buying process by months and you may find yourself paying more than you could have purchased for months back.
That being said, don’t just drop a pin on the map and go for the cheapest house in the state, research the areas that have low prices and see how these suburbs have been tracking over the past year in terms of capital growth and rental yield. Spend some time researching proposed local developments where it may be a new train station or Shopping Centre, the time spent researching may pay off in a big way.
Working out your monthly budget and see what you can afford and what you can sacrifice to help you achieve goal, refer to one of our articles 'Ways to cut your expenses and increase your savings' to help you on your way. Just remember because the property is cheaper does not mean it will be easily affordable.
To see how Rentvesting can work for you, contact us today on 0433 590 621 for a free in home assessment and action plan.
*This is general information and does not take into account your own personal financial circumstances, objectives or needs. You should consider this information in light of your own personal circumstances before making any investment decisions.