As property prices around Australia continue to rise, particularly in our capital cities, the barriers to entry for our property market are getting higher and higher.
For aspiring homeowners who are still yet to enter the market, it can feel as if they’re never going to be able to afford a home.
However, thanks to a not-so-new property investment strategy, more budding investors are now able to break into the market and start building their wealth without having to compromise on their lifestyle or where they choose to live.
This strategy is called “Rentvesting”, and it’s proving to be an extremely viable solution for many Australians around the country.
In this article, we’re going to explore the concept of rentvesting to help you understand:
- what rentvesting is,
- how it works, and
- how it can help you to reach your goals of property ownership sooner.
Let’s get straight into it.
What is Rentvesting?
Rentvesting is an approach that involves continuing to live, work and rent where you are now while investing in property in a much more affordable area with a much lower barrier to entry.
Typically, the aim is to invest in an area that’s poised for substantial growth and demand in the coming years – helping you to boost your equity, grow your portfolio and accumulate more wealth.
While rentvesting is by no means a new property investment strategy, it has grown in popularity in recent years as the Australian property market has continued to boom.
Of course, the jewel in the rentvesting crown is the fact that aspiring homeowners can continue to live and work in an area that better suits their lifestyle without having to worry about making large mortgage repayments for the privilege.
How does Rentvesting work?
When it comes down to it, getting started with a rentvesting strategy is not dissimilar to starting a typical property investing journey.
Of course, several key steps can be taken to help increase your chances of success:
- Take stock of your financial situation
The first critical step of a successful rentvesting journey is to gain a clear understanding of your financial position to help determine your ability to buy an investment property to rent.
The best thing to do is draw up a budget and factor in all costs associated with both renting and investing to make sure you can comfortably cover it all.
2. Speak to multiple lenders to get a clear idea of financing
Before you start looking for somewhere to invest, you need to know how much you’re going to be able to borrow for investment property financing.
Getting pre-approval from a lender will help give you a strong indication of your borrowing capacity.
3. Find the right investment property to suit your goals
This is where you need to consider factors such as location, the type of property to invest in, and what you can afford to spend.
Ideally, you want to buy an investment property to rent out in a location with plenty of growth potential.
4. Hire a property manager to keep your investment running smoothly
Finding a good property manager is key to ensuring your property investment strategy is working well for you. This is particularly important given you may not reside anywhere near where your investment property is located.
While the process sounds simple on the surface, it’s important to consider your individual situation throughout and adjust as necessary to suit your specific goals.
What are the benefits of Rentvesting?
As mentioned, there are several benefits to employing a rentvesting strategy to help accelerate investment property ownership in Australia. Let’s consider these in more depth.
There’s no need to give up your current lifestyle
Rentvesting allows you to continue living and working where best suits you, while still being able to break into the property market and start securing your financial future.
Skip the high barrier to entry into the property market
Choosing to invest in an affordable area with great growth potential makes it much easier for you to get your foot in the door without compromising your financial situation.
Enjoy additional income and tax benefits
Not only does rentvesting provide you with an additional income stream to help build your wealth, but you can also take advantage of various tax benefits associated with investing to help improve your financial circumstances.
What are the risks involved with Rentvesting?
When deciding whether rentvesting is a good idea for you, there are several risks you should consider, in line with your unique situation.
The property market is unpredictable
It’s important to remember that the Australian property market does have its ups and downs. Make sure that you can handle any downturns financially – in particular, that you can afford to pay your mortgage if your property has no tenants for a period of time.
Interest rates are unpredictable
Similar to the property market, interest rates can also move up and down in line with various economic factors beyond your control. It’s wise to factor a rate rise into your budget and make sure you have a financial buffer available if things do get tight.
Working with tenants is not always an easy task
While it’s always sensible to hire a property manager to handle your tenants, you still may find yourself dealing with a difficult tenant or even no tenants for a period of time. It’s important to be prepared for all possible situations as a landlord.
Rentvesting vs buying property
While rentvesting is often a more affordable option, some of you may also find yourself with the financial capability to buy a home to live in your desired city.
In this case, it’s important to weigh up the risks and benefits of rentvesting vs buying people, in line with your particular circumstances, to get a clear idea of which choice is right for you.
For example, buying can offer you more stability than renting a home, and there’s a certain satisfaction in knowing that the home you live in is yours.
On the other hand, a rentvesting strategy can provide you with an additional income stream and help you to start building your wealth much sooner.
At the end of the day, only you can make the right decision that best suits your individual situation.
This leads us to our final point…
The importance of doing your research before Rentvesting
As you can see, rentvesting can be the ideal solution to help you break into the property market, build your wealth and secure your financial future.
However, it’s always important to do your research and due diligence so you can weigh up all your options before jumping in.
Remember that there are always risks involved with buying an investment property to rent, and the decisions you make need to align with your individual goals and financial circumstances.
Of course, if you do need help making smart investment decisions, or getting the answers to any questions you may have, the best thing you can do is talk to an expert in property investment.
That’s where we come in.
Are you looking for guidance to help get started on your Rentvesting journey?
At inSynergy, our expert team is here to help you.
inSynergy is a full-service and specialist Property Investment Advisory firm dedicated to helping you learn how to use property investment and finance as a tool to build a more secure future.
We provide our clients with a broad range of professional services designed to assist with all aspects of property investment, including property investment education, property investment strategy, finance and mortgage broking, and sourcing high-growth investment properties.
Through every interaction with you, our focus is on helping you to safely build a successful property portfolio and achieve your financial goals without sacrificing your lifestyle.
Get in touch with us today to discover how inSynergy can help you on your investment journey.
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Please note, that this article and the information in it is general and not to be considered as financial advice. However, you can book a meeting with us for personalised advice tailored specifically to you