While some first home buyers struggle to save up enough money to pay for a deposit, others have found a new option. Enter the rise of a somewhat new phenomenon sweeping the nation: rentvesting. Essentially what rentvesting means is that young people are choosing to buy an investment property as their first purchase, while continuing to live with their parents or rent a cheaper property. This allows people to still have a solid foot in the property door but means they aren’t necessarily in over their heads.
For example, buying in Perth is probably unattainable for most first home buyers. However, by choosing to buy an investment property in Cockburn, a first home buyer could reap the rewards of capital growth and rental income – meaning they don’t have to make ridiculous mortgage repayments each month.
Sounds like a pretty good way to get into the market, but there are definitely some things that need to be considered before jumping into rentvesting.
For example, unless you are thinking of becoming property investors the idea of purchasing your first home purely as an investment might seem counter intuitive. Also, you still have the pressures of dealing with interest rate rises and property maintenance costs.
These issues aside, rentvesting allows you flexibility, stability and of course a leg up in the property world. So, if you’re seriously considering rentvesting here are a few questing you need to consider before jumping in.
- Since you won’t necessarily ever be living in the home, where should you buy?
If you don’t have to consider your own commute to work or proximity to family members you are able to have a much bigger area to invest. If there is a suburb that is set to boom that isn’t close to you, you should still consider it.
- Is this going to be pure investment or potential home one day? Keep this in mind not only with location but type of property you choose to purchase. While a savvy studio apartment might work well for tenants, if you intend to live there one day will you be able to live there with children, pets and two cars?
What happens if interest rates rise? Will your rental income still cover the repayments?
Rentvesting is an excellent option if you want to maintain your lifestyle but also think seriously about your future. For more information on rentvesting, ask our friendly Mortgage specialists at Smartline Rockingham. We’ll help you work out your borrowing power and what type of properties you can afford.