Can rentvesting end the nightmare that was once the great Australian dream?
Those looking to get a foot on the property ladder are frequently priced out of suburbs close to work and their preferred social scene but rentvesting offers the chance to have their lifestyle cake and investment too.
In an era where the aspiration of homeownership appears increasingly intangible for many first-time buyers, the once-attainable dream of the eat ‘Aussie dream’ now feels like a distant fantasy.
The surging property prices have pushed the dream of owning a first home out of reach for many, transforming it into a daunting nightmare, and causing stress, worry and a feeling of hopelessness.
However, amid the challenges, a glimmer of hope emerges in the form of rentvesting – a strategic practice that combines property investment with the flexibility of renting in sought-after locations.
Renters live where the choose and invest in more affordable properties.
Could rentvesting be the new Australian dream, offering an alternative path to property investment?
It may not be for everyone, but it could prove to be the solution for many.
As we take a fresh perspective on homeownership, we need to first explore the pros and cons of this strategy to understand the whole picture and know if the traditional dream is worth giving up on and a new dream worth fighting for.
Pros of rentvesting
Partial property ownership
Rentvesting allows individuals to maintain a sense of property ownership, even if it’s not their primary residence.
This advantage ensures buyers don’t have to give up on the dream of homeownership altogether, offering a valuable middle ground. Some would say it’s the ultimate win-win.
Diversified investment portfolio
Rentvesting introduces a strategic approach to maintaining a diversified investment portfolio, injecting stability and long-term financial gains into the dream of homeownership.
Rather than relying solely on property, this method allows individuals to explore various investment assets, such as ETFs, shares and cryptocurrency, aligning with the preferences of many young investors.
Flexibility and location choices
The allure of a desired and aspirational location often comes with a hefty price tag in sought-after neighbourhoods.
The cost to rent is usually way less than the cost of the mortgage for a similar type of residence. What rentvesting does is provide the flexibility to live in desirable areas without the immediate commitment of homeownership, which to some is the equivalent to “having your cake and eating it too”.
Ability to move often
Rentvesting provides the flexibility to move frequently and try out different areas before committing to a formal home purchase.
This allows individuals to explore various neighbourhoods, adapting to changing preferences and lifestyles without the constraints of permanent home ownership.
Investment in high-growth areas
Rentvestors can strategically invest in high-growth areas, with the option to either sell the property or extract equity to fund the purchase of their dream home at a later date.
This flexibility allows for dynamic decision-making based on market conditions and personal aspirations.
Tax advantages on investment property
Rentvestors can claim tax advantages on their investment property, such as negative gearing, by claiming all their outgoing expenses against their taxable income, which may not be available if they choose not to rentvest.
This financial benefit enhances the overall attractiveness of rentvesting as a wealth-building strategy.
Cons of rentvesting
Long-term financial commitment
Engaging in rentvesting requires a substantial long-term financial commitment, particularly for those aiming to transition to a personal residence.
This commitment necessitates careful financial planning.
Impact on future home purchase
Transitioning from an investment property to a personal residence requires meticulous planning to avoid pitfalls and additional financial burdens, impacting the decision to buy a future primary residence.
It’s not that it can’t be done, it just not something that happens without a lot of planning in the background.
Market risks and property values
Rentvesting is not without risks, as market fluctuations can impact property values, demanding a vigilant approach to safeguard against economic downturns.
Interest rate fluctuations can also play a major role in the determining factor of the increase or decrease in property price cycle.
It’s really important to understand as a first-time investor or purchaser that the property market cannot be easily predicted.
If we’ve learnt anything over the last three or four years it’s that the market will do what it always does and be unpredictable.
Rentvestors are at the mercy of landlords increasing rent annually, making it challenging to save consistently for a future home purchase.
The unpredictability of rent hikes can hinder long-term financial planning.
The fluctuating rental costs may introduce uncertainty into the savings process.
Rentvestors may find it difficult to allocate a consistent portion of their income towards a future home purchase when faced with annual rent increases.
Insecurity and involuntary moves
Rentvestors may experience insecurity and the potential for involuntary moves, especially if they develop an attachment to a rented home.
This uncertainty can be emotionally challenging for those who wish to settle in a particular location but face the risk of relocation.
Property dreams can come true
In the ever-changing world of real estate, the dream of homeownership doesn’t need not be abandoned entirely, rather, it requires a personalised approach tailored to individual circumstances.
If owning your own home doesn’t align with your current situation, consider thinking outside the box by strategising, planning and exploring rentvesting as a viable option.
By embracing innovation and adapting your dream to fit your unique circumstances, rentvesting becomes a compelling avenue to keep the dream alive in a dynamic Australian real estate landscape.