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.
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?
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.
— The Australian (@australian) March 21, 2017
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
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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