Money & Living
We all know the feeling: You’re renting in a bustling suburb. You're in a cute two bed apartment filled with plants. You’ve embedded yourself in the local community, have a favourite brunch spot and a seat with your name on it at the local pub. You’ve been eyeing up some of those new apartments and townhouses around the corner but they are all just COMPLETELY out of your budget.
Well, rentvesting might be for you!
Rentvesting means you get to live where you want and put your money into an investment property – it’s the best of both worlds.
It's 2019 - everyone knows that first home buyers have it pretty tough. First home buyers usually can’t afford to live where they rent and then they’re forced out further and further from the area they know and love and have come to make a home in. But what are the alternatives?
Rentvesting is your alternative.
It’s a pretty fresh term but it basically means first home buyers who purchase a property but continue to live in a rental. The benefit is a foot on the property ladder but no sacrifice on lifestyle.
A study by lender Mortgage Choice found that in 2017, 27.6% of borrowers purchased an investment property before buying a home they would live in.
Rentvesting has become popular with gen-y and millennial buyers.
It's turning the classic Australian dream upside down from a house in the ‘burbs with a big backyard (and a hills hoist!) to a home close to cafes, restaurants, small bars and music venues. The kids are playing in inner city parks and at the beach instead of their own gardens (read: balconies).
So where to buy?
The key is to look for an investment property in an area that’s still up and coming rather than one that has reached the peak of its pricing. That will generally be one further away from the centre of a major city or you could look to a different town or even state altogether. Once you’re investment property has gone up in value, you can sell it for a deposit or use it as leverage for a larger mortgage and your dream home.
But the system isn’t without its potential pitfalls.
Renting isn’t as secure as owning, so you could find yourself having to look for a new home every six to 12 months if your rent goes up or your landlord decides to sell. When you’re renting, you probably won’t have the freedom to redecorate or get a pet.
Issues can also arise with your investment property. If you are unable to find tenants, you will be stuck paying both the mortgage and your rent – and that could be pretty scary! You’re also responsible for any repairs or upgrades that your investment property requires which could end up being pricey. And there’s always the risk that the investment property won’t increase in value so you won’t be able to use it as a stepping stone to greater property success.
Think rentvesting could be for you?
Do your research, speak with your bank or a financial advisor, and take the plunge.
Pop into a Bendigo Bank branch to see who your local financial advisor is.