As the cost of living rises and savings come under pressure, rentvesting has gained in popularity, especially among young buyers eager to break into the property market.
But what exactly is rentvesting, and with soaring rental prices, does it still hold up as a viable option?
What is rentvesting?
Rentvesting, a blend of ‘renting’ and ‘investing’, is a strategy where you choose to live in a rental property that suits your lifestyle, while owning an investment property in a more affordable market. For example, you might live in a rental property near the Sydney CBD or along the coast, while owning an investment property in a regional town like Armidale, Dubbo, or Wagga. The idea is that you can afford to live in a more favourable location or property, while still enjoying the benefits of owning an investment property, such as rental income, capital growth and negative gearing.
Reshaping rentvesting
For rentvesting to be financially beneficial, you still have to find a suitable and affordable place to live. However, in today’s market, where rental prices have skyrocketed and demand for quality rentals is high, traditional rentvesting is becoming increasingly challenging. As a result, we’re seeing young people adapt their strategies.
Many, who would have previously stayed with parents to save for a home, are now funnelling their savings into buying an investment property. This enables them to enter the property market sooner, generating rental income which can help support their mortgage payments.
Moreover, with official data showing net long-term arrivals in the year to September were about 542,000, and the Federal Government planning to approve about 190,000 permanent visas for 2023-24, conditions would suggest demand for rental properties is set to remain strong. This is particularly relevant for Southwest Sydney, where statistics show 19.2% of NSW’s migrants choose to settle.
Redefining the ‘great Australian dream’?
We get it, you don’t want to live with mum and dad forever. You can still work towards owning the home you live in, but how you achieve it may vary depending on your strategy.
Buying regional: Historically, regional areas have appreciated in value at a slower pace compared to capital cities but offer higher rental yields. This means if you want to eventually sell your investment property and use the proceeds to buy in Sydney, you’ll need to keep it for longer or play the risky game of making property cycles work for you. This strategy suits those comfortable with a longer-term approach or happy living with family or friends for the time being.
Investing with an eye to occupy: If you have the borrowing power, you might buy a property with the intention of moving in later. This might mean renting out the property initially while saving for renovations or reducing the home loan. This approach hinges on being in a low-cost living situation, such as with your parents or in a share-house.
Whether you’re considering purchasing your first investment property or looking for guidance on navigating the property markets in Southwest Sydney, our team is here to help. Contact us using the details below and start your journey towards smart property investing.
The information referred to in this article was obtained from publicly accessible sources from NSW Government, CoreLogic, SMH and Property Update. The information provided in this blog post is for general guidance only and should not be taken as personal advice. We do not accept any liability for any errors or omissions.
Prudential Real Estate Campbelltown | (02) 4628 0033 | campbelltown@prudential.com.au
Prudential Real Estate Liverpool | (02) 9822 5999 | liverpool@prudential.com.au
Prudential Real Estate Macquarie Fields | (02) 9605 5333 | macquariefields@prudential.com.au
Prudential Real Estate Narellan | (02) 4624 4400 | narellan@prudential.com.au
