The Australian property market is becoming increasingly accessible to first home buyers. Many buyers of this category are absconding traditional methods of buying property in favour of ‘rentvesting’ as a more financially viable way of getting onto the property ladder.
What is it?
Rentvesting is the term coined for the recent trend of individuals investing in property in areas they can afford while continuing to rent in the area they want to live. One may, for example, invest in property in the suburbs but rent closer to the city due to work commitments. Rentvesting allows an individual to get their foot in the door whilst maintaining a lifestyle that is more practical and affordable to them.
This is one of the more recent phenomena to sweep the property market with the challenge of affordability becoming increasingly prevalent. So what are the pros and cons, and why is it becoming increasingly popular?
- Most practically- rentvesting allows you to choose where you want to live. The reality often is that where you want to live, and where you can afford to live are very different. Rentvesting allows you to invest where you afford and live where you choose.
- Freedom: rentvesting provides a slight relief on the financial constraints of buying property. You can live in the area that suits you while benefitting financially from the rent on your property. There’s also a high chance that the mortgage you take on may be smaller.
- Fewer ties – when rentvesting gives you the freedom to move. You’re free to move as and when your situation and commitments change!
- Buying a home this way allows you to enter the property market with a smaller deposit, and thus, sooner than if you were saving for a more expensive, long-term home. You could even use any gains on your property towards buying your dream home.
- Another positive aspect of rentvesting is the wealth generation that can come with it. This could be your first step in building a successful property portfolio.
- One downside is that you’ll still be spending ‘dead-money’ on rent, which may seem counter-intuitive.
- You won’t own the home you actually live in. This could mean you are still dealing with landlords, and leases, meaning you may have to move around occasionally.
- As a tenant, you may also not be able to make any changes to the property you choose to live in, which can be a disadvantage if you’ve committed to a longer-term lease.
Rentvesting is just one of many tactics used by first home buyers to enter the property market. If you’d like further advice on rentvesting or where to buy, you can call us on 1800 184 284, or alternatively, you can book a call with our friendly team of experts.