Many Australians want to start building wealth by jumping onto the property ladder. Unfortunately, for many of these people, buying homes in the places they live and work is prohibitively expensive. While buying a primary residence might be out of reach in the short term for these people, investing in property is not off the table, thanks to rentvesting.
What is rentvesting?
The neologism 'rentvesting' refers to the concept of buying an investment property while continuing to rent a separate primary residence. For many living in Melbourne's more affluent suburbs, buying a home in their area is often a long-term goal as opposed to something they can afford to do right now. To be able to invest in property, they need to look somewhere other than the place they live and work.
What are the benefits to rentvesting?
The primary benefit of rentvesting is being able to live and work in the place you want, while still building equity in a property. In many ways, you get the best of both worlds with respect to renting and buying. You're the owner of a property, so you're able to capture any capital gains that arise over time; you're also a renter, meaning you have the flexibility to move somewhere easily should you want to.
What are the downsides to rentvesting?
While rentvesting is a viable strategy for building wealth, it's not without its downsides. You need to have sufficient cash flow to cover both the mortgage payments on your investment property as well as the rent on your primary residence. The rental income from your investment property can help with this, but it often won't cover it entirely.
There's also the fact that a rental property can't be renovated to your choosing. It can be hard for some to know they own a property that they could do with what they please, but they can't do the same with the house they live in. For these people, a better strategy may be just to save for a home in the place they want to live, even if it takes a little longer to do so.
To learn more about rental investing, and check out some of the properties we have available for purchase, get in touch with the team at Brad Teal today.