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Rentvesting: an affordable alternative for first-time investors?

Monday, 11th Jun 2018

It’s hard to consider investing in property as a young buyer without addressing the elephant in the room – housing affordability. For many young investors, the prospect of paying off a mortgage alongside kick-starting a career, travelling the world and paying back student debt just isn’t a possibility through the “traditional” avenue of home ownership. With property prices in high-demand suburbs becoming increasingly unaffordable, what was once deemed the Australian dream is also losing appeal amongst upcoming investors who still want to enjoy the benefits of the inner-city lifestyle while they’re young.

As a result, in recent years we’ve seen more and more first-time buyers forego the traditional home ownership model in favour of rent-vesting – renting somewhere to live whilst buying an investment property in a more affordable suburb. So what are the potential benefits of this investment strategy? And how could rent-vesting help first-time buyers break into the property market without giving up the new Australian dream?

Young investors

Invest where you can afford, rent where you want to live

For many aspiring investors looking to enter the property market, buying a home in their dream location isn’t always a possibility. With affordability posing a greater issue in inner-city suburbs, becoming a home owner often means looking further afield and sacrificing perks such as proximity to work, nightlife and activity precincts. By becoming a rent-vestor, however, modern buyers don’t need to give up their dream location to get a foothold into the property market. Instead, they can enjoy the best of both worlds – investment in a more affordable area with high capital growth potential and renting a property in their ideal location. This can be a particularly beneficial strategy for those looking to rent with others and share the living costs. Most importantly, however, it gives first-time buyers the opportunity to get a head start on their investment journey whilst still enabling them to enjoy the perks of the lifestyle they love.

Flexibility to move around

Rent-vesting can be a great option for investors who want to take advantage of the flexible nature of renting. For younger buyers who aren’t ready to settle down in one location, this investment strategy provides a way to enter the property market whilst still allowing them the freedom to move around as they wish. Whilst perhaps not the strategy for families or investors who want to call their house their own, this can be an ideal scenario for young investors who still plan to travel or want the option to relocate for work. And this benefit isn’t just for young investors – rent-vesting is also gaining increasing appeal amongst busy professionals who move interstate or overseas to take advantage of career opportunities.

Tax incentives

By making their first purchase an investment property as opposed to a home, first-time buyers are able to take advantage of numerous investment tax benefits that aren’t applicable to owner-occupier properties. Whilst owner-occupier mortgage repayments can’t be deducted come tax time, the costs associated with owning an investment property can be. This includes expenses such as interest payments on investment loans, the costs of advertising for tenants, repairs and maintenance and more. These tax benefits can make the prospect of owning a property considerably more affordable for first-time investors.

Start your investment journey earlier

For investors looking to purchase a home in a location that suits their lifestyle, it can take years to save up a deposit, which often means putting long-term investment plans on hold. Rent-vesting provides a way for aspiring investors to enter the market earlier through a more affordable avenue so they can begin growing their wealth and building the equity they need to either buy that dream home or start expanding their property portfolio.

If you are a first-time investor looking to make your first purchase an investment property, it’s incredibly important to find a property that aligns with your long-term investment goals. As experts in property investment, our professional buyer’s agents can assist you in finding high-performing properties that fit your investment criteria and, most importantly, provide you with the best possible start in your property investment journey.

Contact us today to organise an obligation-free consultation with one of our property investment specialists.