Rentvesting what is it?
Why is Rentvesting gaining popularity?
Who is a typical Rentvestor?
Property Prices in Australia continue to soar
With rising interest rates and property prices, traditional home ownership is increasingly out of reach for many first-time buyers, and others. One can either give up, or turn to RentVesting—a strategy where you choose to buy investment properties while continuing to rent your primary residence.
Australian property prices continue to increase on the back of low supply of housing, compounded by strong population growth and immigration into Australia.
Plus high interest rates and thus ones ability to borrow sufficiently has been reduced accordingly and or mortgage repayments will be too high affecting your ability to live the life you want and deserve!
Another factor is trying to save for a deposit whilst paying rent and or wanting to build a home but your rental payments wont allow you to do both renting and building … any of these ring true for you?
You are not alone, there are hundreds of thousands of Aussies in the same boat. But this does not make you feel better does it?
We know the Problems, but what is the Solution?
You still want to get into the property market … yes?
Have you given consideration and thought towards “Renting where you want to live, and investing in an Investment Grade, investment property, which will give you a stronghold into the property market?”
We call this “RENTVESTING.”
Rentvesting is a home-owning strategy where you rent a property to live in, that is suited to your lifestyle, while you own investment property, that meets your budget. A very popular strategy.
Rentvesting is catching on with young people wanting to get into the market, who don’t really know where they want to live or who have a limited budget and don’t want to squeeze the ‘wrong property’ into their budget, just for the sake of buying something to live in.
Rentvesting is also catching on with many other Australians who simply do not have a sufficient deposit required and or cannot borrow sufficiently to buy the home they really want, in a location in which they want to live in.
Rentvesting is growing in popularity in a market where one has to be creative to get a foothold into a very tight and growing property market, where prices continue to rise.
Did you know, according to Mozo’s data analysis, First Home Buyers, according to ABS data, demonstrate that 6.8% of FHB loans are for Investment Properties? This is up from 4.2% a couple of years ago. This is a significant shift in the number of Aussies choosing to invest in their first property, rather than buying to live in.
The reason for this is that these buyers want to be in the Property Market, to benefit from capital growth, rental income and tax deductions, and thus invest in a property … even though they cannot afford to buy a primary residence to live in.
Soaring property prices and high interest rates are definitely influencing new buyer’s strategies. It just makes so much sense doing so, rather than watching the property market from the outside, doing nothing. Be warned, not all property is worthy of investment. It makes investment sense to work with a team who have vast experience in the residential property market, working with investors … rather than trying to save a dollar, going it alone.
Statistics demonstrate that it is taking around a decade for a home buyer to save a deposit to purchase what they want. This goal post continually shifts as property prices grow and on the back of higher interest rates. Can you imagine in 10 years time, based on current median price growth the price of the same property then.
This would mean you now need double the amount of your current intended deposit in 10 years! The goal posts just keep shifting …
Invest Today
If you are confident in that you will not have a sufficient deposit to buy what you really want to live in, where you want to live in today, then it could make financial sense to focus your attention on becoming an Investor.
If you are confident you will not have the required deposit in 5, 7 or 10 years time to purchase what you want to live in, then it could make financial sense to focus your attention on becoming an investor.
Becoming a Rentvestor allows you to achieve your property aspirations.
Watching the property market from the sidelines, chasing that elusive deposit required keeps you from achieving your property aspirations.
Build a Portfolio to help you buy the home of your dreams
What if, you secured an Investment Grade, investment property today, that could be cash flow positive in your hands or at the very least help you pay the tax man that much less in tax you are going to pay away to him anyway?
What if your tenant helped you pay off your mortgage on your investment property that much quicker?
What if your investment property achieves the capital growth the market is offering you?
What if the above is helping you secure your next investment property that much sooner?
Capital Growth and paying down your mortgage allows you to generate a deposit for your next investment, cash flow from rental income improves your borrowing capacity. This plus other factors allows you to borrow sooner for your next property. Whether that is to live in or for investment purposes.
If you do elect to build a portfolio of investment grade properties and be a Rentvestor, you have choice at a time in the future to sell off the ones not performing as well for you and use the borrowing capacity and equity to Purchase where you want to live, whilst holding onto those working hard for you, generating residual income that could help you improve your retirement goals.
You now have options you will not have, sitting on the side watching the market, if you become a Rentvestor and get in on the property ladder.
Where to invest and what to invest in?
A prudent strategy is to :
- Match your investment to the purpose for the investment – i.e. capital growth or high rent or both
- Match your investment vehicle and strategy to your budget, not all property is investment grade
- Match your budget to a location that meets the purpose of your investment
- Remove emotion when investing, emotion will guarantee you a lower return on your investment, but only 100% of the time
- Refrain from squeezing the ‘wrong’ property into your budget
- Work with a team of like minded professionals who have a long history in the property investment space, they will save you time and help you make more money
Types of Residential Property you can invest in
- Houses
- Yields around 3% to 4.5%
- Duplex Homes
- Yields around 4% to 5.5%
- Dual Key houses
- Yields around 5% to 5.5%
- Townhouses / townhomes
- Yields around 3% to 4.5%
- Apartments / Units
- Yields around 3.5% to 5%
- Co-Living houses
- Yields around 5% to 5.5%
- SIL Homes
- Yields around 7% to 9%
- NDIS Property / SDA Property
- Yields around 10% to 18%
*Yields are generalised and will differ according to location, age of property, floor plans, market circumstances and are shared for guidance purposes only.
Noteworthy Pointers for RentVestors
*A new dwelling will achieve higher yield than the older one next door. A new home has lower ongoing maintenance and has higher depreciation benefits than the older one next door. Capital growth potential should be the same, being next door to each other. What this means to investors, as a generalisation, is that a new home, over the life of your investment, should perform significantly higher on your balance sheet, compared to the older one next door. Ask us how and why.
*The longer you own the property for, the lower the risk element of your investment. Most investors look to hold their investment for a period of 7 to 10 years. This typically mitigates risk whilst reaping higher rewards.
*Avoid being put off my ‘horror investor stories’. People only put online ‘horror stories’, but never explain that they perhaps chose a lemon, didn’t take advice or work with someone in the know or the myriad of other reasons. Their failure, if you choose to follow their advice, becomes your failure too. You are choosing to fail ahead of time, when you avoid taking action. And this is where you are at today anyway … if you have not invested yet.
Build Now, Pay Later for First Home Buyers, Downsizers and anyone wanting to build a property to own or invest in … read more here – are you Struggling to Pay Rent (or current mortgage), but want or need to build another property? Homepay could be your solution.
