Conventional wisdom is that a rentvestor is typically a home buyer who rents where they want to live but can’t afford to buy, and buys an investment property somewhere more affordable, generally in the middle to outer ring suburbs where the rental return is better and rent covers most or all of the mortgage, however often at the expense of capital gain.
There are many others who rentvest – the first home buyer who is told by the bank they can’t afford to buy, but rent in the same suburb they currently live.
There are also those who choose to rent, because of their travel needs, but have a home in an area they used to live, or where they intend to settle.
A Mortgage Choice survey shows rentvesting has increased from 21% of investors to 37% of investors over the past 12 months alone. With few out of pocket costs and little impact on lifestyle it is a savvy way to enter the property market.
There has been a lot of talk recently about Gen Y’s feeling locked out of the housing market and baby boomers telling them to suck it up because you can’t have everything and maybe if you got a better job or moved to the country you wouldn’t be so locked out. Rentvesting is the perfect solution for Gen Y’s to have their cake and eat it too (get into the property market without sacrificing lifestyle)!
However, like most things there are pro’s and con’s to renting that need to be considered.
At the end of the day the question is: which property choice is going to be the most likely to help achieve your goals? Then the question is: can we really afford it; have we done our research; which areas have low prices to buy but also have solid rent rates and a strong likelihood of increasing in value are the ones that really matter.