With Melbourne being one of Australia’s most expensive cities, it’s no wonder a growing number of residents are settling for rented homes. Many believe it’s too difficult to break into the market.
But that doesn’t mean giving up. You just need to take a different approach.
You can actually start working towards your dream home in your dream suburb through ‘rentvesting’.
Rentvesting is where you rent a house and invest money into a property elsewhere. Due to affordability restraints, some Melburnians are choosing to purchase in locations outside of their home suburb.
CoreLogic head of research, Tim Lawless, told News.com.au “purchasing outside of Sydney and Melbourne as an investor has been a worthwhile option for many buyers…Many buyers probably still aspire to own a home in their local city, and see the option of investing in other areas as a logical stepping stone on their way to more localised home ownership.”
How does Rentvesting work?
Do you have your heart set on a four-bedroom home in South Melbourne? But don’t have the funds to buy property there? Then you might consider the rentvesting approach.
To become a rentvestor, you could find an ideal four-bedroom home in South Melbourne to live temporarily, then buy a property in Melton West where it’s more affordable. Or go beyond the inner city suburbs and buy in towns such as Mortlake (2.5 hours from the city), Charlton (3 hours), or Edenhope (4.5 hours).
To cover your own rental payments, the property you buy can then be rented out. And later sold for a capital gain.
By going down the rentvesting path, you’re able to have the lifestyle you want now while building a property portfolio for the future. So you can stop seeing rent money as ‘dead money’ and use renting as part of an effective investment strategy.
Do your research and seek advice
Before you embark on the rentvesting journey, Listing Loop recommends seeking advice from your financial institution/mortgage broker and real estate agent to ensure the best outcome. You don’t want to find yourself unable to make repayments or choose a location/property that’s unlikely to make you a profit.
You also need to consider tax implications. While interest payments on your loan can be claimed as tax deductions, you might also be liable to pay tax when you decide to sell.
Rentvesting can work well if you do it right. Ensure you look at all the facts first. Then make a decision based on what works best for you and your family.
Have you done your research and know which suburbs you wish to buy and rent in? Speak to your agent about joining Listing Loop – and be the first to know about suitable properties!