• Why more young people are choosing to 'rent-vest'

    Why more young people are choosing to 'rent-vest'

    Millennials pride themselves on working smarter, not harder and the rise of ‘rent-vesting’ – where first-time buyers get onto the property ladder by renting where they want to live and buying elsewhere – is a perfect example.

    Research shows rent-vestors are now a large yet distinct category of property buyers, especially in Sydney, where the median house price has skyrocketed in the past decade.

    According to a 2017 study commissioned by Westpac, rent-vestors make up about 8% of homeowners – and the figure is tipped to rise. It found in most circumstances high prices were driving young buyers to look to cheaper areas to get a foothold in the market, while renting elsewhere.

    Westpac says rent-vesting – first noted as a trend by property group LJ Hooker in 2013 – is most popular among Generation Y men who are usually single, hold a degree and earn a relatively high income. They’re less emotional about home ownership than the broader population and see property as part of a suite of investments.

    Richard Batten, a RAMS Home Loan Specialist from Revesby in New South Wales, says he’s witnessed a spike in the number of people choosing to rent-vest in recent years and believes the main reason for this all boils down to it making good financial sense.

    “If you can’t afford a certain area, it makes rational sense to live where you want to live, but buy a property elsewhere in a more affordable area and use it as an investment,” he says.

    “It’s a way to potentially shore up your financial future, but also maintain the lifestyle you want,” Richard explains.

    For those priced out of Sydney, saving a deposit and buying somewhere else, such as a regional area, could deliver steady rental income to service the mortgage and capital growth, he says.

    Why more young people are choosing to rent-vest_Pic2 - house 
    Rent-vesting allows you to snap up an investment property outside the pricier capital cities. Picture: realestate.com.au/buy

    “Buying a property remains the biggest financial investment most people will ever make, but this approach is a just a little more strategic,” Richard says.

    Taku Ekanayake, a 29-year-old rent-vestor from Sydney agrees that it all comes down to dollars.

    After setting out to buy a Sydney home to live in, Taku switched track to rent-vesting and now owns six tenanted properties, living “where he wants” in rented accommodation.

    “I was very committed to getting onto the property ladder and after researching, I came across the idea of buying an investment property, rather than a home first. The numbers were more appealing to my position in life,” he says.

    The rent Taku collects covers most, if not all, of his mortgage repayments and expenses. And he’s able to carry “good debt”, which is income-generating debt and tax-deductible investment debt.

    It’s a strategy that could be a good option for anyone, he adds. “I’d encourage anyone looking at purchasing a property to do the numbers on both buying an investment property versus a home to live in – and really do the numbers, purely from a financial point of view,” Taku says.

    “The first home you buy is not going to be your dream home, for most anyway. So, why get so attached to the idea of buying a home first?”

     

     

    Originally published on flatmates.com.au


     

    About the author

    • Raymond

      Raymond A Ram is the RAMbassador for RAMS Financial Group. Raymond works with the RAMS team to bring simple, helpful and expert information on home loans and savings accounts to life with his down to earth and cheeky personality. He enjoys seeing everyday Australians turn their dreams of saving for a goal or getting into a home a reality. 

      Growing up in Goulburn, NSW, Raymond was brought up with good old-fashioned Aussie values of hard work and a fair go. It soon became apparent that Raymond wasn't content for the conventional path of grazing, producing the very best wool, and finding a nice sheep to settle down with. So it wasn't long before his passion for performing and his talent as a likeable larrikin shone through - landing him a few roles such as 'RAMlet'. He was even tipped to play RAM-bo at one point but chose to become star of the small screen instead as RAMbassador for RAMS. He now finds this role so much more rewarding.

      Contact your local RAMS Home Loan Centre about your home loan options.

      Raymond A Ram
     

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    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.

    The views and opinions expressed in this article are those of the author alone and do not necessarily represent the views or opinions of RAMS Financial Group Pty Ltd ABN 30 105 207 538 (RAMS),  Westpac Banking Corporation ABN 33 007 457 141 (Westpac) or their related bodies corporate. This article is strictly for information purposes only and neither RAMS, Westpac nor any of their related bodies corporate make any representation as to the accuracy or completeness of the information in this article or endorse the views expressed in it.