What is Rentvesting and How Does It Work?
These days more and more people are adopting the strategy of rentvesting as it allows them to get their foot in the property market sooner than later.
This strategy is generally common with the people residing close to CBD / City but would not be able to afford to buy a property where they live.
As you might be aware that Sydney had a median house value tipped at $1 Million as of Feb 2020 and it remains the nation’s most expensive market, and out of reach for many first-home buyers.
First home buyers are perhaps the most affected by price hikes, as the size of the deposit they need increases by the day. While property prices in Sydney are not appearing to levelling out and getting difficult for new buyers to get into the market.
That’s why rentvesting is one of the best options to explore and the rental income you collect from your investment property can help you cover your rental payments, while your investment property continues to build value through capital gains.
Rentvesting: A Home Buying Shortcut
There’s an accepted way of doing things for first home buyers in Sydney these days that involves sacrificing your lifestyle to afford mortgage payments and moving far away from work, family and friends.
It doesn’t have to be that way. Rentvesting is an alternative strategy that involves renting a property where you want to live and buying your first home as an investment property in an affordable location. It may be unconventional and unfamiliar, but for a market like Sydney could be your best option.
Live Where You Want To Live
Living where you want to live may be the most attractive benefit that rentvesting offers. Because you’ll be renting at a place coinvent in meeting your lifestyle while getting the property appreciation benefits through your investment property.
This will also increase the potential to purchase additional properties which can provide better financial security in the long-term.
It reduces the impact that high prices have on your lifestyle and allows first home buyers to get onto the property ladder without forcing you into a long commute to the workplace which could potentially be more than an hour in most cases.
It’s worth considering rentvesting as 3 out of 10 clients whom I meet have got stuck with the point of where to buy (location) for a long period in some cases even longer than 5 years.
If adopted with rentvesting they could have not only entered the property market sooner but also would have enjoyed tax benefits because of negative gearing.
When it Comes to The Property It’s all About Numbers
One of the most important aspects which point towards renvesting is the outflow and inflow of money with either taking the route of owner-occupier or investor.
For instance, if you are renting in a place where you pay $500 weekly and looking to buy an owner-occupied property roughly your potential weekly outgoing would come roughly to $800 to $850 per week for a home and land package priced around $850K. On the other hand, if invested in an apartment which is in a walkable distance to train station, schools and shopping center you would not only help to save your tax but also will not impact your current lifestyle
Invest Where You Can
CoreLogic’s most recent data shows that value increases in most areas in Sydney exceed 10.8 percent over the 12 months to February 2020.
With prices all around Sydney at a high and increasing by the day, affordability is a key concern for most buyers. By rentvesting, you’re not restricted to buying in unaffordable places close to your workplace. Instead, you can look at areas based solely on where you can afford it.
Homebuyers in Sydney could benefit from this approach as prices close to city CBD is becoming increasingly unaffordable. Locations like Granville, Quaker Hills, Liverpool and Merrylands offer viable alternatives for apartments with average values under $650,000.
When buying your first home as your primary residence, you might have a lot of factors to consider. On the other hand, when buying as an investment property the only thing you must consider is would you be able to get a tenant sooner or having low vacancy rates.
By investing your money smartly, you can fasten your climb up the property ladder and make your goal of buying your dream home a reality sooner or later.
It is important to be patient while the value of the property increases. Don’t be tempted to sell the property, as when it comes to the property to reap exceptional benefits you need to look at it a long-term investment goal.
I am more than happy to help you if you’re looking at buying your owner-occupied or investment property.
As an astute property consultant in Sydney, I would be more than happy to meet and discuss the possible property investment strategy suitable for your current and future needs.
You’re advised to speak with accredited professionals with regards to taxation, accounting and mortgage as required.
I do not hold an Australian Financial Services Licence as defined by section 9 of the Corporations ACT 2001(Cth) and I am not authorised to provide financial services to the Listener, Reader, or Viewer, and I have not provided financial services to the Listener, Reader, or Viewer.
In the meantime, please have a look at the property options in Sydney and please feel free to call me at +61 470 467 709 to schedule a meeting to take this forward and help in achieving your property investment goals.
