Rentvesting offering more women chance to enter property market

With property prices having skyrocketed in Australia, both in capital cities and in the regions, over the past few years, many investors are needing to think outside the box to buy property.

Many, including a disproportionate amount of women, are making a start by buying an investment property in an affordable location as their first property purchase.

Some see navigation of the rentvesting maze as a long-term plan to eventually end up with enough deposit to buy their own home in a preferred location.

The other alternative is to save as much of your income as you can for the next eight years and hope you have enough deposit to then get into the market.

For women, this exercise of saving for a home deposit is even tougher because of the current 13.8 per cent gender pay gap.

It takes 91 months for a woman to save a 20 per cent deposit for a median priced dwelling in Sydney or Melbourne. With the additional pressures of inflation, including increased fuel, rents, childcare and utility costs, saving for a deposit can be impossible for many.

From renter to owner

Despite the recent stabilising in property prices in some capital cities, median prices for homes remain buoyant. This trend is likely to continue as there’s still a shortfall of properties needed to cope with current and expected demand.

It’s little wonder then, that a growing number of Australian women are becoming rentvestors. They choose to rent in the suburb they want to live in while buying an investment property in a location they can afford. It’s the best of both worlds.

In its 2021-22 Federal Budget, the government introduced the Family Home Guarantee aimed at supporting 10,000 eligible single parents to enter the housing market with a deposit of just 2 per cent.

As women comprise 63.5 per cent of all single parents according to the 2016 Census, the scheme is likely to end up supporting more women to access the property market.

Women have significantly less money saved for their retirement – half of all women aged 45 to 59 have $8,000 or less in their superannuation funds, compared to $31,000 for men. The average superannuation payout for women is a third of the payout for men - $37,000 compared with $110, 000.

Property ownership reduces the likelihood of poverty at retirement age. Poverty rates among renters hover around the 42 per cent mark compared to 6 per cent for owners.

Homeownership also reduces cost of living upon retirement, right at the time when income drops. Moreover, home equity is playing an increasingly important role in funding aged care services, which is expected to increase over time.

Rentvesting at a glance

With the gyrations in the property market, smart first-time property investors are viewing rentvesting as a sound path to property ownership. Under this strategy they enjoy living in a great location while buying an investment property in a more affordable location enabling them to:

• ease into the property market at an affordable price point
• watch their deposit increase their net worth and build an asset
• purchase an asset they can leverage as security for a future loan to buy their eventual primary residence
• still enjoy the tax-deductible benefits of property investment.

Many women have discovered that rentvesting can be a smart way to avoid the prospect of becoming homeless when they get older.

Even if you aren't an 'owner-occupier' in the property you opt to buy, you still enjoy the benefits of increased capital growth over time.

The other benefit is you control the investment property and can always move into it later and nominate it as your principal place of residence.

Adopting a rentvesting strategy ensures you enjoy greater control over what property you buy. For example, you decide:

• how much of your pre-approval loan you need to draw upon
• when to buy your second and subsequent follow-on properties
• what location to buy into for your second or third property
• what cash flow yield is needed from your investment property to avoid overstressing your finances.

Rentvesting also offers the prospect of your investment property accruing a tidy capital gain over the medium to long term.