As property prices continue to rise, purchasing in a centrally-located or sought-after area is out of reach for the average working millennial. Instead, many are opting to rent rather than buy as it means not having to compromise their inner city or beachside lifestyle. But for those who are still eager to enter the market, there is a way to get the best of both worlds.
‘Rentvesting’ is the term coined for when you purchase a property for investment purposes in an affordable location and continue to live and rent in the area of your choice. An example of how the market is evolving, it is a wealth creation strategy that is popular among the younger generation due to the flexibility it offers in comparison to being an owner-occupier.
Instead of purchasing a property in the outer suburbs and commuting to the CBD for work, there’s an increasing trend of millennials using rental income to cover the mortgage expenses, so they can continue to live the city lifestyle.
For this strategy to work, you’ve got to be a good saver and there needs to be a focus on delayed gratification. You need to live within your means and not 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 as this provides higher rental yields.
In the past the great Australian dream was to buy a home and do everything you can to pay that down as fast as possible in the hope of living debt-free. ‘Rentvesting’ is quite the opposite. You’ve got to have an open mind, stick to your budget and be comfortable with debt.
A recent Mortgage Choice survey highlighted an increase in ‘rentvesting’ from 21 percent of investors to 37 percent over the past twelve months alone. But while this strategy may appear ideal to many, it’s not suited to everybody.
To ensure you have the means to make ‘rentvesting’ work for you, contact me today to make an appointment. I can determine your borrowing capacity and provide options for investment loans.