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Could this be the best property investment strategy in current market conditions?

Could this be the best property investment strategy in current market conditions?

The millennials have certainly faced a fair bit of criticism in recent years for their inability to part with their smashed avos and coffees, to save money for their first home deposit. But are they really to blame or has this simply manifested because of today’s media and lifestyle environment?

Whilst to some; avoiding instant gratification for the greater rewards of delayed gratification may seem like a no brainer, one could argue in today’s modern world there may just be other ways. Much like how more and more cooperates are adapting their workspaces with hot desks and co-sharing spaces, perhaps its time to rethink the traditional methods of home ownership. A method where millennials can have their cake and eat it too (with a coffee!). Enter Rentvesting.

The Concept

Rentvesting has been a largely untapped option in recent years. If you’re a first-home buyer, you should seriously consider rent-vesting rather than maxing out your borrowing capacity to buy your dream home, the very first time you dip your toe into the property market.

The concept provides you with that elusive sweet spot between developing and growing a healthy investment portfolio and living in your desired location. And you don’t have to sacrifice your lifestyle in the process.

No doubt owning investment properties whilst still renting does seem counter-intuitive. However, it works provided you have the discipline to invest the surplus from your income once you pay your rent. This is what stops your rent money becoming dead money.

The Rent-vesting concept has been with us for a while now. It is an interesting twist on property investing and as first-home buyers become increasingly savvy, more and more property buyers are exploring its advantages.

Smart Benefits

Strategically, one of the major advantages of rentvesting is it doesn’t have to be a long-term decision. You can take advantage of it if you need a little more time to put finance in place to buy a property.

Rentvesting allows you to prioritise building up your property portfolio through smart, tax-deductible investment decisions rather than focusing on an owner-occupier endgame.

The flexibility of Rentvesting opens up opportunities for you to live in an upscale location while buying in more rental-focused areas. This enables you to enjoy your preferred lifestyle without having to thread the needle on your financing.

This “try before you buy” model enables you to rent in your preferred location, or type of property, to check it delivers on your lifestyle expectations without the risk or hassle of buying into the area prematurely. It also gives you time to grow your savings or to tuck away your surplus cash flow for your own home.

Lifestyle Advantages

If you are looking to establish a property component within your investment portfolio but have lifestyle considerations too, rentvesting offers a flexible solution. If you happen to be looking to get your children into your preferred school and it’s a stretch for you to buy in that location, rent instead. Rather than over-committing yourself financially, rent there for 12 months or 2 or 3 years and get your child into that hard-to-find school. You can always move at a later date. In the meantime, you can put your money to work for you by investing it.

Final Observation

For many of us, the allure of home ownership still outweighs the advantages of renting in some situations. But smart investors know that rather than servicing your mortgage from your after-tax income, you can work your money harder in an investment property. These advantages include:

  • Building up an investment property portfolio while living where you want;
  • Putting your money to work for you smarter;
  • Renting strategically for access to schools or work while maintaining your investment property; and
  • The “try before you buy” model enables you to rent in your preferred location, to confirm it delivers on your lifestyle expectations.

A savvy rentvesting strategy combines rental income from your tenant with some potential tax benefits.

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