Most Australians grow up with the dream of buying and living in their own home. But, given the difficulty of cracking into the market in trendy locations, another option has emerged.
So what is rentvesting?
Put simply, rentvesting is the increasingly popular practice of buying an investment property while continuing to rent.
The logic surrounding the idea is that rentvesters will be able to rent out the investment property to generate an income stream that covers their rental payments.
The property can then be sold at a later date for capital gains.
Rentvesters tend to buy investment properties in affordable areas while renting a property somewhere more affluent.
This allows them to live in their desired location whilst building an investment portfolio that will eventually provide them with the means to purchase a property there.
Who it might suit
Rentvesting may be most suitable for young professionals who want to live an aspirational lifestyle in the present without endangering their chances of getting on the property ladder later on down the line, and who are willing to wait a while to call their home their own.
That said, rentvesting is not for everyone. Particularly not for those who see renting as a waste of money when they’d rather be channelling their earnings into something that is fully theirs.
The pros
Rentvesting gives people the opportunity to get on the property market sooner than they might otherwise have. That’s because a smaller deposit is needed to purchase a property in more affordable areas.
It also allows people to live the lifestyle they want without having to worry about taking on a huge mortgage, as well as giving them an opportunity to build wealth and reap the tax benefits of investing.
The cons
The primary concerns many people have with rentvesting involve the fact that it requires pushing lots of money into rental payments.
There are also no guarantees that rentvesting will pay off, and it may seem counter-intuitive to buy an investment property before your own home.
In this way, rentvesting is not necessarily suited to those with emotional attachments to properties.
Is rentvesting right for you?
If you’d like to explore if rentvesting suits your individual circumstances, come and visit us to find out more.
We’d be happy to help you look at the various ways you can crack the property market.