As home prices continue to increase in prized inner-city areas, this strategy has become increasingly popular amongst younger buyers entering the market. With over one-third of first-time investors practicing rentvesting, this strategy will continue to grow as property prices continue to increase (2019 Property Investment Sentiment Survey).
At first glance, rentvesting doesn’t make logical sense. Why would anyone choose to pay additional rent when they already have a property and mortgage to pay off?
The simple answer is because rentvesting can provide the best of both worlds. You can buy an investment property according to your budget, to start earning a rental income and get your foot on the property ladder to achieve future capital growth. On top of this, renting out an investment property may recoup most or if not all of the running costs.
As you may not be able to afford a property where you want to live, a rentvester may be able to afford to rent in a suburb they love – close to work or other lifestyle benefits.
Advantages of rentvesting:
- Live where you want to
- Makes living in expensive suburbs possible
- If your workplaces changes, finding a place to rent is far easier than purchasing or finding jobs closer to your permanent residence
- Invest in higher capital growth corridors without affecting your place of residence
- Opens up your investment pool to opportunities in other more affordable cities such as Brisbane, Adelaide and Perth
- Potential tax benefits from negative gearing and depreciation