The rise of rentvesting

Many young Australians, particularly those in the expensive major cities, are realising that renting where they want to live and buying real estate elsewhere or 'rentvesting' — can allow them to have their cake and eat it too.

Like Jazz Monzon, who at just 25 bought an investment property in Perth rather than a first home. Her property search was hyper focused; she just wanted somewhere that was low maintenance and cash flow positive.

"I bought an apartment that was very close to the CBD for a relatively good price," Ms Monzon said.

 
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"I think rentvesting is definitely a good idea if you want to get into the property market but you don't have enough of a deposit [for the home you want]."
For the past five years, her tenant has more than covered her mortgage, so last year while renting in Melbourne, Jazz decided to buy a second property. Again, she wasn't after a home for herself. "I was looking to buy within the $500,000 to $600,000 range and open to any location that would give me the most growth,” she said.

Picture: Unsplash

Creating a future home deposit

Renvesting can also be a way to get together a deposit for a future home.

Sydney buyer's agent, Cameron Porter from Porter's House said he's seeing more and more young people choosing to rentvest as a way to crack the market and start acquiring equity.

"If someone had bought in Brisbane two years ago for $500,000, it could now be worth $700,000. They can sell that and then they've got a $200,000 deposit."

Flexibility, lifestyle and tax benefits

Rentvesting also offers young property owners flexibility.

“Those in their 20s and 30s don't want to be tied to a property," Mr Porter said. When looking for a property to rent out as an investment, their search can take them anywhere. It just takes thorough research.

Mr Porter said. "It's knowing the end goal and doing enough research about the area and then property types within that area."


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There are a couple of other benefits with rentvesting too. Rentvestors can claim some investment expenses as tax deductions. Plus, they may be able to borrow more for an investment property because some lenders will take into account the rental income.

But keep in mind, rentvestors aren't able to access the First Home Owners Grant or similar schemes and may be liable for capital gains tax if they sell.

Using rentvesting to build a property portfolio

Ms Monzon says she would like to buy her own home in a few years when she's made enough capital growth from her investment properties – and when she's more settled in one place.

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In the meantime, she wants to keep building her portfolio with another residential property and potentially a commercial asset too. And she wants to keep them all for the long term.

"Eventually I would like to be able to pay off some of them, and just have the passive income on those investment properties on top of my primary residence as well," she said.

This article was originally published on realestate.com.au ‘How young property owners can have their cake and eat it too – buying without sacrificing lifestyle’