One of life’s greatest achievements is putting down that long saved up deposit on your very first home. Whether it be the freedom of having a place to call your own or the stability and security of home, having your own piece of property is a dream highly sought after generation after generation. While this dream is now becoming more of a nightmare as young people struggle to get their foot on the ladder, is the alternative of renting the place you live really just throwing away dead money?
The recent article on Domain expressing that the number of homeowners under 40 has fallen dramatically in just four years is showing an alarming trend of the dream of homeownership slipping away from young people. While this trend has been occurring over the last decade, it is only in the past 4 years that we have experienced a massive shift with the percentage of homeowners under 40 dropping over 10% since 2002 and 6 per cent since 2010 according to The Household, Income and Labour Dynamics in Australia Survey.
Having a generation that is more likely to rent may not necessarily be a bad thing, if renters are able to make the most of the situation handed to them. Rent money has historically been perceived as dead money by those promoting homeownership but this may not be the case in certain situations. If a tenant is to live in a high growth area, such as those closer to the capital cities, their weekly rent may be drastically less than mortgage repayments if they were to purchase a home in the same suburb. This has particularly become the case in recent years as rental yields plummet amid booming capital values.
Now this doesn’t exactly solve the issue of sending rent money into the abyss but it does mean, if the tenant rents rather than buys, they will have more of their paycheck left over at the end of the month. This leads to greater opportunities if they make the right decisions. Now for some people, this money could be spent on a good night out or some extra clothes in the wardrobe. However, for many under 40, the decision to invest in property in strategically selected suburbs has allowed them to offset the potentially dead money spent on renting.
This means that even though rental expenses are not working towards anything for the long term, there are strategies in place to continue building wealth while also living in an area close to the city which is simply cheaper to rent.
Through rentvesting, renting your place of residence while investing elsewhere, you can enjoy the flexibility and lifestyle aspects of renting while also creating the comfort and security of having an investment strategy to build wealth. This means that rental income can be recorded as just another lifestyle expense without the guilt of feeling you are stuck paying someone else’s mortgage off but instead you are building a portfolio of your own with income producing property.