There’s an established way of doing things for the average Australian first home buyer. It usually involves saving for years to put together a deposit, before paying down a mortgage over a decade or so – but it doesn’t have to be this way.
Rentvestment, or renting the property you live in and buying an investment property, is one interesting alternative. While it’s certainly not for everyone, it offers a range of advantages that could make climbing the property ladder a little easier for young Australians, or those who don’t yet own property.
Let’s have a look at the logistics and advantages of rentvestment, to help you decide if it’s the way forward for your property aspirations.
How does it work?
Rentvestment is an incredibly simple concept, so it’s a wonder more young Australians aren’t trying their hands at it. All it involves is renting the home you live in, while you buy another and using it as an investment property.
This means that you’ll have tenants, an investment home loan and a range of other unique challenges to overcome.
It also means that you may not be able to receive a First Home Buyers Grant, as in most states the conditions require that the property be your primary residence for a period of time.
However, with the help of a mortgage broker, a solid savings plan and an expert property manager, these challenges are unlikely to present too much of a problem, so you can stick to enjoying the many benefits. What exactly are these benefits, and what could they mean for you?
Live where you want to live
With rentvestment it’s not necessary to compromise on location to the same degree.
Many first home buyers who go about it the old fashioned way sacrifice so much. One of the most common sacrifices is location – for the obvious reason that housing is far cheaper in areas further away from city centres, where demand is more reasonable.
With rentvestment, it’s not necessary to compromise on location to the same degree. Using our country’s most extreme market (Sydney) as an example, let’s have a look at why rentvestment is a smart option.
Pricefinder data puts the median property price in the centre of the city at $4.5million. With a median price so high, it may be difficult to find anything affordable, so most first home buyers wont even consider the city. If you rentvest however, it’s possible to rent out a one bedroom flat for as little as $200 to $400 a week.
By doing so, you can live wherever you want, while investing in a more affordable location.
Maximise your investment return
With rentvestment you can focus solely on finding the best possible investment returns when buying.
When buying your first home, its potential as an investment property isn’t usually of the greatest concern. Instead, proximity to relatives, schooling, hospitals and other such things may be prioritised. With rentvestment you can focus solely on finding the best possible investment returns when buying, and those other concerns when searching for your rental.
As a result you’ll get the best possible outcome from your investment property, and increased capital gains and rental yields may mean you can move up the property ladder faster. Illawarra in NSW for example, saw a 12 per cent value gain according to NAB’s Spring property report.
You may not have even considered such a location for your first home, but as a rentvester your options are open and you can buy wherever promises the best return.
If you’re looking at buying your first home, there’s more than one way to skin a cat. With the right advice from local real estate agents and mortgage brokers, rentvesting could be the perfect alternative to help you achieve your property goals in 2017.