It’s no secret that the property market in large cities such as Sydney & Melbourne are heading in the direction of unaffordability for homeowners. The growing population keeps both housing demand and housing prices sky high. Due to the financial constraints of city living and being in their family forming years.
59% younger Australians are attracted to the idea of moving away from the city. Drawn back from 1981 to 2021, housing prices continuously rose with unexpected numbers. Sydney for example, one of the most bustling cities in Australia, from median price of $79,900 year 1981 to $1,311,641 this year that is 8.8x higher and for someone to be able to buy a house should have an average full time earning of $93,500. In addition, unit prices jumped from $67,300 to $824.860, not only Sydney’s housing and unit prices show tremendous increase but also all cities in Australia and it will not stop but continuously rise for the following years.
It comes as no surprise buying property has been difficult for many Australians who are trying to enter the property market in their family forming years therefore Australians consider moving to a regional area.
This is where rentvesting provides a solution. You get to live in a desirable location close to work and lifestyle, which is much less than the cost of a mortgage in the same location. Without the need to compromise your living standards to get in on it. A rentvestor would be targeting investment opportunities in high growth suburbs outside of their living city as this would result in requiring a lower deposit and therefore, a lower home loan debt.
In fact, from the recent survey 55.2% of the respondents believe now is a good time to invest in residential real estate and 17.4% of respondents were “rentvestors” and 4.2% of respondents would consider rentvesting as a way of getting into the property market. Rentvesting can allow you to build and expand your portfolio by making a smart investment decision rather than one based on emotion, as is often the case when purchasing a home to live in. It allows you to live in a superior property or location, without having to make a large financial commitment to the property so soon. Living where your money works for you.
To be a Rentvestor is now a new trend and has become a more popular method in the property market as its primary benefit is keeping your lifestyle location while entering the property market in a more affordable area. For example, buying a larger house in a booming regional area might be $600,000.
Renting out the regional property helps cover ownership costs. On a profit-earning investment, you can cover your own rental costs and create passive income. Additionally, buying in a more affordable location, means you spend less time saving a deposit. Growing regional areas can have some fantastic capital growth opportunities, which you don’t want to miss out!
You can then use the equity from your first investment to purchase another and start generating capital gains. With two properties gaining equity, you’ll have two sets of tenants paying your mortgages and better tax advantages.
There has been no better time in the last decade to be a rentvestor than right now. There are a number of factors in the current fiscal environment working in favor of the investor, which is simultaneously benefitting the life of our average renter. These factors are providing more opportunity and access to the market while operating with historically low holding costs.
Unlike sole owner-occupiers who generate income from their salary alone, rentvestors have two additional streams of income – rent generated from tenants living in their investment properties, and tax benefits.
The booming property market paired with Australia’s low level of stocks in the property sector shows that investors can be relatively confident in achieving significant compound growth. Compound growth essentially means to create growth on growth. To develop compound growth, investors must apply a system that allows buying a property, seeing growth, withdrawing the equity, then repeating this process. By buying an investment portfolio first and creating compound growth, rentvestors can afford to buy a desirable home they want in just a few years’ time.
Potential tax benefits include claiming some of your investment property expenses as tax deductions, such as insurance, depreciation and the interest paid on your loan. This could mean that you wouldn’t have to always pay such a high income tax payable at each financial year!
Jennifer, 26 years, Sydney
Jennifer came to One Central Property wanting to build wealth through property investment.
She was 28 years old. She was looking for a few years but never found the property that ticked all her requirements and wanted someone to guide her through the whole journey.
Her salary is $80,000 and she has managed to save $80,000.
She wasn’t sure whether she should buy a home and live in it as her first purchase or if she should continue living with her parents and purchase a separate property investment.
Our Property Consultant came out with a solution with the following steps:
At One Central Property, we believe property investment is the best way to increase wealth and obtain financial freedom. Let our experts help you grow your property portfolio and support your rentvesting journey by booking a Property Strategy Session with us today!