Median house prices have skyrocketed to up to 16 times the median wage in Australia over the past two decades, compared to just four times the median wage in the 1980s. And that can create difficult conditions for anyone wanting to get their foot onto the property ladder.
With Melbourne’s median house price now upwards of $1 million, most potential first home buyers have two main choices.
They can scrimp and save to buy a house in an area they don’t really like because it’s what they can afford.
Or, they can think outside the box and tap into the ‘rentvesting’ trend.
WHAT IS RENTVESTING?
Rentvesting is when you rent a home in the area you love, so you can enjoy the lifestyle you want, while buying an investment property in a super smart investment location.
It’s becoming an increasingly popular option for people priced out of the inner-city market, with latest ABS figures revealing around 340,000 Australians – or up to 15 per cent of all private tenant households – are rentvestors.
The Property Mentors CEO Luke Harris said rentvesting was a clever stepping stone for anyone wanting to fast-track their entry into the property market or quickly expand their investment portfolio.
He said switching the traditional order and buying an investment property before your primary residence could make a profound difference to your wealth position over time.
“Rentvesting allows you to buy an investment property, subsidised by the tenant and potential tax benefits, while you continue renting a better-quality property yourself in an area where you would prefer to live,” he said.
“Because of the rental income you receive on an investment property, if you choose rentvesting, you may be able to continue buying properties into the future.”
WHAT ARE THE BENEFITS?
While the biggest benefit of rentvesting is that it allows you to own property without sacrificing lifestyle, there are plenty of other positives as well. These include:
Expanding your horizons Rentvesting means you aren’t limited to buying where you want to live, so you can look anywhere that’s a solid investment – and that includes interstate
Reaping tax rewards Rentvesting allows you to take advantage of the generous tax concessions only available to investors, such as claiming tax deductions against your investment property income, including interest on loans, rental costs like insurance, advertising, strata fees and depreciation costs.
Getting there faster Buying an investment property in a more affordable area requires less capital – and that means you may be able to get into the investment market sooner.
Growing your wealth Because all your money won’t be tied up in a huge mortgage on your primary residence, you have more capital to invest. And you can leverage your first rentvestment to buy more properties to expand your portfolio and build long-term wealth.
How The Property Mentors can help
The Property Mentors can help you navigate the ins and outs of rentvesting, including identifying your borrowing capacity, managing your living expenses and ensuring you are financially ready to build a property portfolio. Our experts will guide you through the process of how and where to wisely invest so that you can achieve your desired lifestyle.
