‘Rentvesting’ – What is it?

by Mar 16, 2018First Home Buyers

As house prices continue to rise I’m seeing more of my clients priced out of their desired location to live. 

This could be anything from a first home buyer wanting to purchase in an area they grew up in or that is close to work and friends, or families wanting to move into a preferred area because of the school zone.

To overcome the affordability issue, get a foot in the property market and live in a desired location that can offer you that dream lifestyle, ‘rentvesting’ could be an option. Rentvesting is a term used for when you purchase a property in a more affordable location, keep it as an investment and then rent in an area that you want to live but cannot afford to buy in. Of course, as with any investment strategy there comes risk and uncertainty so below I’ve listed some of the Pros and Cons to be mindful of when considering this as a potential option. PROS

  • When renting it allows you the benefit of living in the suburb that you desire
  • The investment property provides you with a rental income that can then be used to assist with the payment of the mortgage
  • There could be potential to purchase more than one investment property and build a portfolio that in turn could boost your future wealth

CONS

  • You may find that there is some instability if you are having to move to a couple of different rental properties. Families may find this more inconvenient than younger first home buyers
  • You do not have the freedom to renovate or decorate if you are in a rental property
  • There is no guarantee that the investment property you purchase will get the capital growth you desire, and there is a possibility that you could get stuck with problem tenants

There are many more considerations and scenarios of how this might work and benefit different people and it will come down to different strategies, goals and financial situations of each individual or family.  The best place to start is to understand your borrowing capacity and to do this you can call Nikki at Cherry Lending + Finance to discuss your plans and have her review your current situation. Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.  Subject to lenders terms and conditions, fees and charges and eligibility apply.