Owning a property in today's real estate market environment is an enviable position to be in.
Prices continue to rise across most of the country’s capital cities, with the latest CoreLogic data showing values climbed 12.9 per cent year on year nationally in March.
You may be surprised to hear, therefore, that millennials appear to be leading the charge regarding real estate investment, despite these rising prices.
ING Direct figures showed that 22 per cent of people aged between 18 and 34 claim to own at least one investment property, whereas 19 per cent of baby boomers said the same.
How are millennials beating their wealthier generational cohorts to the punch? Part of the answer lies in the popular practice of ‘rentvesting’, but what is this trend and why is it quickly becoming the go-to approach for savvy young investors?
How rentvesting helps you buy your first home
there is more than one way to get on the property ladder, work with an adviser who can help you
Rentvestors are people who buy real estate in one place but choose to live in rented accommodation elsewhere rather than occupy their property. Rentvestors often purchase homes in affordable areas, but reside in more expensive inner-city locations.
You can enjoy the best of both worlds; rentvesting enables you to get a foot on the property ladder at a young age without the sizable deposits needed for in-demand areas.
Moreover, rentvestors can earn added income from allowing tenants to stay in their investment property. Even if rental money doesn’t quite cover the maintenance costs and mortgage payments, there may still be tax benefits.
Making major life decisions such as changing jobs, moving to a different city or going travelling can also be simpler when you don’t have to worry about selling or renting out a home you’re currently living in.
Rentvesting can be a great way for you to buy your first property and still have the flexibility to live wherever you want, but there are potential downsides.
You will likely want to rent out your property and dealing with tenants can be stressful and time-consuming. Real estate investors also miss out on lucrative first home owner grants, as they are only available to owner-occupiers.
Meanwhile, you’ll be living in rented accommodation, so you may have landlord problems of your own!
Even if this isn’t the case, you are often restricted by the terms of the lease, so renovating your home could be difficult and there’s always a chance you may be asked to move out at the end of your contract.
There is a lot to think about when considering investment options and your personal opportunities. Would you like to talk through your property investment options? Please get in touch with a member of the team at Invest Blue for more information.
What you need to know
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Invest Blue Pty Ltd (ABN 91 100 874 744) and Subsidiaries trading as Invest Blue, is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327, Australian Financial Services Licence and Australian Credit Licence No. 232706