You may be chasing more affordable prices, dreaming of a lifestyle change, or spotting investment potential in a different market altogether. No matter the reason, buying property in another state can be pretty tempting. But let’s be clear: buying interstate isn’t quite the same as finding a place down the road. You may have to […]
Let’s Talk About Rentvesting in Australia
By Deltos Finance on June 10, 2024
You might find the traditional path to homeownership challenging, especially with rising property prices in desirable areas. Plus, it usually takes an average Australian over five years to save for a home loan deposit for a median-priced residential property. Enter rentvesting—a strategic approach for getting a foot on the property ladder without compromising your lifestyle. Today, let’s explore what rentvesting is, how it works, and whether it’s the right real estate investment strategy for you.
What is rentvesting?
Rentvesting is a relatively new property investment strategy where you buy an investment property in an area you can afford while continuing to rent in a location that suits your lifestyle. With this approach, you can live where you want while building wealth through property investment in more affordable areas.
How is it different from nest vesting? Nestvesting is a similar concept but with a twist. Instead of renting elsewhere, nestvestors stay home with their parents while purchasing an investment property. They can maintain or lower their living expenses while gaining extra income through a property they have rented out. Nestvesting can be particularly advantageous for young Australians with a supportive home environment who want to start their wealth-building journey early.
How does rentvesting work?
Rentvesting involves purchasing a property in a growth area with strong rental yields while renting in a more desirable location. Here’s a scenario to illustrate how it works:
Matt wants to live in inner-city Sydney but finds the property prices prohibitive. He rents a place in Sydney for $1,750 monthly and buys an apartment in a Hobart suburb for $350,000, which he put up for rent. The rental income from his Hobart property helps cover his mortgage payments and monthly rent in Sydney, allowing him to invest in property without sacrificing his desired lifestyle. In the future, he can also leverage the equity in his Hobart property to buy another investment property.
So, is rentvesting worth it? Is it suitable for first-home buyers?
Rentvesting is a tactical approach to property investment, especially for those who find it challenging to buy in their preferred living areas. As they invest in promising areas with strong rental yields, rentvestors can hugely benefit from capital appreciation and rental income. Simply put, rentvesting is a smart way for more Australians to enter the property market sooner rather than later.
Rentvesting can be an excellent option for first-time homebuyers. It offers the flexibility to live in desirable locations while investing in more affordable areas. But it’s essential to consider the potential challenges, such as managing an investment property and the lack of capital gains tax exemptions for primary residences.
What are the risks and rewards of rentvesting?
Is rentvesting a good idea? Like any investment strategy, rentvesting comes with its risks and rewards. Here’s a quick rundown to help you decide whether it’s the right path for you:
Rewards
- Flexibility: Live where you want while investing in affordable areas.
- Wealth Building: Benefit from capital growth and rental income.
- Tax Benefits: Claim tax deductions on investment property expenses.
Risks
- Market Fluctuations: Property values and rental yields can fluctuate.
- Property Management Challenges: Being a landlord comes with responsibilities and potential issues. It can be extra challenging when your investment property is miles away from where you’re living.
- No CGT Exemption: Investment properties may not be qualified for capital gains tax exemptions available to primary residences.
How can investment loans help you rentvest?
Do you like your odds with rentvesting? You can start with investment loans.
Investment home loans are tailored for property investors and can offer features like interest-only repayments, which can help manage cash flow. These loans often come with competitive interest rates and flexible terms to help you finance your investment property while renting elsewhere. Talking to a local mortgage broker can help you find the best investment loan options to suit your rentvesting strategy.
Where should you rentvest?
In 2024, rentvestors and nestvesters are looking at growth areas with strong rental yields and potential for capital appreciation. Popular locations include regional areas and outer suburbs of major cities like Brisbane, Hobart, and Adelaide. These areas offer more affordable entry points and promising long-term growth prospects.
If you’re eyeing Hobart or suburbs in Tasmania, check out our blog ‘Best Suburbs in Tasmania to Invest in 2024’ for more tips on where you can rentvest successfully.
Final thoughts
Rentvesting and nestvesting are innovative strategies for allowing you to enter the property market without letting you compromise many things, including your lifestyle. But the important thing is to understand how these approaches work and weigh the risks & rewards to make informed decisions that align with your financial goals.
Whether you’re a first-time homebuyer or looking to build your investment portfolio, rentvesting is worth considering. If you want to learn more about this real estate investment strategy, don’t hesitate to give us a ring. We’re ready to answer your questions and help you explore all your available options in property investing.
Enquire Now
Find Your Perfect Finance Solution
Let's discuss your finance needs. We’re here to help.
More posts from Deltos Finance
Suburbs with the Highest Rental Yield in Tasmania
The term “rental yield” is music to any property investor’s ears. It’s the key metric that indicates the annual return on your investment, essentially the percentage of the property’s value that comes back to you in rental income. In a market like Tasmania, which has been gaining traction for its overall investment appeal, pinpointing the […]
Launceston: A ‘Second Wind’ Property Market You Should Invest in Now
When talk turns to Tasmania’s property scene, it’s easy for the spotlight to shine brightly on Hobart, with its bustling waterfront and historic charm. But just a little further north, nestled at the head of the picturesque Tamar Valley, lies Launceston—a city that quietly hits its stride and presents a compelling proposition for savvy property […]
How Often Does Property Double in Value?
Every homeowner has likely dreamed of their property doubling in value in the future, turning into a valuable nest egg or funding their next big adventure. But how long does it actually take for a property to double in value? And how often does it happen? While there’s no magic eight-ball to predict the property […]
Stamp Duty Exemption for First-Home Buyers in Tasmania: Has It Paid Off?
Purchasing a property has historically come with major financial difficulties, especially for first-home buyers in Tasmania or any other state for that matter. The stamp duty is one of those most notable monetary challenges for homebuyers. Essentially, it’s a tax levied on property purchases that often adds tens of thousands of dollars to upfront costs. […]
Difference Between Airbnb and Traditional Renting in Hobart
Hobart’s property market has become a hotspot for investors largely because of its strong tourism demand and stable rental market. But that doesn’t mean all property investments in this Tasmania capital are a sure win. One factor to consider is deciding between short-term rentals like Airbnb and traditional long-term renting. Each option has distinct advantages […]
Is Launceston a Good Place to Live?
The short answer is yes, especially if you want a more affordable lifestyle without giving up access to key services, natural beauty, and long-term opportunities. Also, with its blend of heritage charm, steady economic growth, and a property market still within reach for many Australians, Launceston, Tasmania, is gaining momentum as a popular area for […]
Hobart Property Management Fees: A Complete Guide
You’ve already secured an investment loan and finalised your rental property purchase in Hobart. Now, it’s time to take action by listing the property for rent and managing it effectively to start generating rental income. But how much should you expect to spend on property management in Hobart, Tasmania? As Tasmania’s capital continues to attract […]
How Rising Property Prices Affect Your Home Loan and Buying Potential
Here’s the good news: the Australian real estate market has been experiencing significant growth in recent years, with house prices in major cities reaching record highs. It can be a huge win for homeowners and investors, especially those planning to sell their properties soon. However, this can be an issue for potential property buyers, including […]
Build Your Wealth with a Simple Guide to Using Your Home Equity
Building wealth requires adopting the right mindset and being strategic when using available financial instruments. Essentially, it’s about making your money work in your favour. But what if you don’t have enough cash to start creating wealth? There’s an underutilised strategy that we want to share with you, and that is leveraging your home’s equity—the […]