Expert Advice with Cam McLellan 25/11/2017
Are you torn between wanting to live in a location that suits your lifestyle and wanting to buy what suits your budget? Well with rentvesting, you can do both!
What is ‘Rentvesting’?
Rentvesting is an investment tactic that allows you to Rent and Invest. It gives you the opportunity to live where you love yet buy what you can afford, to get your foot into the property market by moving away from the traditional ‘buy your own home first’ ideology.
Rentvesting involves living in a rental property in a suburb you love (usually closer to the city), and buying an investment property in a suburb you can afford and with future potential growth.
This can prove much more effective than waiting and hoping for the housing bubble to pop or for housing prices to decline in the area you really want to live, which could take forever.
Instead, you could look to buy a house you can afford, and continue to rent where you love. This method provides many benefits, the main one being that, as you wait to invest in your dream property, you will have a property rising in value and offering you financial benefits for the future.
Advantages of Rentvesting
In a nutshell, there are four main advantages:
1. Live where you love at a cost you can afford
2. Invest in your rental property
3. Schooling opportunities
4. Lower transaction costs to move to another property
Live where you love at a cost you can afford – Rentvesting allows you to spend the money you would be paying in mortgage repayments on renting in a house or suburb that you love. In the meantime, the tenants in your investment property are practically repaying your mortgage for you.
Invest in your rental property – A good rentvester will buy their investment property in an affordable area with major potential growth. While you’re off living the dream in a rental property, your investment property will be increasing in value. Over time, you can choose to use your property’s equity to reinvest elsewhere, or sell the property to gain revenue.
Schooling opportunities – Most prestigious schools require your family home to be in certain ‘zones’. Choosing to rent in these areas gives your child priority in the selection criteria of their enrolment process.
Lower transaction costs to move to another property – Renting avoids stamp duties and other housing taxes when relocating, as opposed to buying and selling. You will also be entitled to tax deductible expenses on your investment property, making you eligible to claim interest payments.
Is Rentvesting for YOU?
Rentvesting is a viable option for almost anyone. However, it is most suited to young individuals, couples or families wishing to turn the first page of their property portfolio; 1 in 4 young Australians now say rentvesting is the only option to own property.
Ideally, rentvesting is most appealing to those wishing to set up their future wealth, or those who simply cannot afford to live where they prefer. Rentvesting is particularly attractive to Generation Y, who are relatively fresh to the workforce and have lower disposable incomes.
Essentially, if you prefer the financial benefits of investing in a property while renting in a quality home over paying a mortgage in an area that doesn’t appeal to you and in a house that needs some TLC, then perhaps rentvesting is for you.
How to get started in Rentvesting
Achieving a great return on investment is dependent upon the property you choose to buy and where you choose to rent so it is important to first consider your finances, such as your mortgage repayments and median rental prices for similar properties in your investment property area. This will help identify any positive or negative differences and give you an indication of how much you can afford to pay in rent.
Market, Area and Property (M.A.P) are three major factors to take into account when considering your rentvestment property. A successful rentvestor will take their time to research the market and scour their designated areas until the right property appears, with the perfect balance of affordability and potential to grow.
Another key to a successful rentvester is their ability to save, save, save. When Australian real estate mogul Tim Gurner told millennials to stop eating overpriced smashed avo for brunch to save for a house deposit, it went viral, mostly because his statement had some merit to it, even if it was heavy handed.
A lot of people suffer from Smashedavocadoitis, especially young adults. But whatever your vice is, try to cut back on frivolous spending and squirrel enough away to invest in property. Before long, you might just find yourself in a position to become a rentvester too!
Like many aspects of property investment, it’s best to seek professional recommendations to ensure Rentvesting is for you and avoid messy situations. When it comes to this, OpenCorp can help. Contact us today or watch our video on how to select a property using the Market, Area & Property (M.A.P) process.
Director of OpenCorp, Cam McLellan is committed to sharing his passion and property investment knowledge with everyday Australians.
Cam started investing in real estate at a young age and quickly mastered the art of building sustainable wealth. He has used the same wealth building strategy to develop a multi-million dollar business, sharing his knowledge and skill with ordinary Australians. Cam has personally bought, sold and developed numerous properties and has an extensive residential and commercial investment portfolio.
Read more Expert Advice from Cam here!
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.