Want to live in the area you love? Buy in the area you can afford to make it happen!
The truth is that if you really want to own a home – whether it’s to live in or for investment purposes – there’s never been a better time to get the ball rolling. According to The Age, Melbourne’s house prices have jumped 35 per cent in the last three years alone, and first home buyers are being forced to front up even more money to reach a 20% deposit!
So even if you’ve decided that the time is right to get on to the property ladder, the state of the property market might mean that you don’t have the funds to buy in the area where you actually want to live. If that’s the case for you, you’re not alone. Lots of first home buyers have to give up their amazing inner-city lifestyle or proximity to work, just so they can buy or build in an area that’s more affordable.
Let’s face it: having to pick up sticks and live on the urban fringe just so you can own your own home can be a tough choice. Luckily, you don’t have to compromise on your lifestyle if you don’t want to. You can still live in the areas that are close to where all the action is, while strategically building your property portfolio and investing in your long-term financial goals.
It’s a concept called “Rentvesting” and it lets you have the best of both worlds without living outside of your means. Here’s how it works: let’s say you want to live in Richmond but with median house prices reaching nearly $1.5 million the houses are way outside of your price range. So instead, you can buy a free-standing house in Wollert or Clyde instead for less than half the price and rent it out straight away.
The proceeds from your investment property can then be used to offset your own rent in Richmond and even build some extra savings in the process! Considering that your dream home in Richmond might cost over $4000 per month for a mortgage but as little as $2200 to rent, rentvesting allows you to utilise what’s left over in your monthly budget to get onto the property ladder without compromising on location.
Rentvesting isn’t just for first home owners who want a maintain a certain lifestyle either. It’s also a fantastic wealth-building strategy for savvy investors looking to make the most of those higher capital growth corridors like Wollert or Clyde. Using rentvesting as an investment strategy can yield some serious tax benefits as well, such as negative gearing, depreciation and interest payment claims.
Regardless of your reasons for rentvesting, it’s an excellent way to get on the property ladder sooner with a smaller mortgage and deposit. What’s not to love about that! It can also give you the freedom and flexibility to move to other locations or houses if your circumstances change. If you’re thinking about rentvesting, here are some key points from the SOHO Living team to take away with you:
Do your research. Rentvesting isn’t for everyone. While your tenant will likely cover the mortgage repayments, you still need to account for maintenance of your property and potential periods of vacancy. It’s also worth seeking financial advice for your specific circumstances.
Remember that you’re buying your first home, not your dream home. Consider what’s likely to give you a better return on your investment over time and yield better capital gains. That means looking carefully at the property and rental markets to see what’s in demand.
Take advantage of House and Land Packages or Townhome packages in higher capital growth corridors. We don’t build there by accident! These areas often have better long-term growth opportunities than fully developed suburbs. They’re also a fantastic way to design properties that produce better rental outcomes and capital gains.
Ready to get started on your Rentvesting journey? Our New Home Consultants are here to help. Get in touch and begin building your new home today.
13 SOHO
