As we start to learn more about the trend of rentvesting, that is renting the home you live in while investing elsewhere, we start to ask who is that is behind this trend? While we can think of the strategy being started by savvy investment bankers who have crunched the numbers and found it to work best for living the high life in the city’s best locations, the truth might surprise you.
New research by Westpac, identified by this realestate.com.au article has revealed that the typical investor is aged between 20-34, located in the metro area and is a male.
“We know the trend of rentvesting is growing, with 41 per cent of all Australians surveyed believing it’s better to buy an investment property in a more affordable area and rent a house in an area you really want to live in,” said Westpac head of home ownership Lauren Fine.
However, renting is not the long term solution for many of these young guys, with 77 per cent of this group looking to purchase a home or an apartment to live for their next property. This means that while it may be difficult to save for a deposit and purchase that first home as an owner occupier, rentvesting is a pathway to achieve this.
Westpac discovered through the survey that 65% of rentvestors were men with 61 per cent being born between the years of 1983 and 1997 with 81 per cent living in metropolitan areas. This comes as no surprise since many renvestors are millennials who are looking to get started in property, overlooking the barriers and finding their own way up the ladder with one of the key advantages being they don’t need to give up their residence close to the city.
These rentvestors have mainly focused their efforts on purchasing freestanding houses with 61 per cent purchasing detached dwellings while 25% have purchased an apartment. The article continues with an example that rings true for many young folks with Bobby Kennedy turning to rentvesting at the age of 22. Graduating university and finding a job in Melbourne should have been enough to provide Mr. Kennedy with the opportunity to purchase a home in Australia’s second most expensive real estate market however with rising prices climbing out of his grasp, Mr. Kennedy sought out an investment in Canberra while still maintaining his lifestyle in Melbourne.
While Mr. Kennedy mentions that he would have preferred to invest in Melbourne, the growth in the city’s prices meant that the money would have gone further elsewhere, meaning that he would need to give up where he would want to live. The advantage though with rentvesting is that the focus is on desirable areas for investment rather than being an owner occupier meaning you rent in areas which are financially more sound for renting, while investing in high yield areas that are more affordable.
Westpac predicts through their report that rentvesting will continue to grow as affordability hampers the efforts of young Australians in purchasing their first home. While the strategy has pros and cons, it is here to stay for the foreseeable future and may come to be a solution that provides the up and coming generations with a good mix of stability of flexibility.