Why investing while you rent makes sense
If you (or your kids) can't yet afford to buy where you want to live, there are still multiple ways you can start making money from property.
Blogger: Paul Glossop, director, Pure Property Investment
The term 'rentvestor' has been a bi-product of the booming Sydney and Melbourne property markets. Would-be first home buyers have been priced out of the respective Sydney and Melbourne markets with 40 per cent and 25 per cent growth over the past three years respectively.
As a result, we are experiencing more and more motivated first-time investors looking to invest further afield in the south-east Queensland markets, while continuing to rent. These rentvestors are using their hard-earned deposits to gain a foothold in the property investment market, and why not? It works!
A great example of rentvesting is below.
This particular client had an $80,000 deposit saved up and quickly realised that this would not be enough to invest in her desired area of Cronulla, where the average two-bedroom unit price is around $650,000.
But rather than throwing her hands up and saying 'I give up', this investor came to us to discuss the option of investing further afield in south-east Queensland.
The client is renting paying $400p/w and did not want to contribute anything further towards the mortgage repayments beyond the $80,000 deposit. Fast forward two months and that is exactly what she achieved. A five-year-old four-bedroom brick home 40 minutes from the Brisbane CBD for $300,000 and yielding six per cent.
The plan for her now is to continue renting for the next five years while her investment appreciates and does not cost her a thing – in fact, it makes her approximately $2,000 in depreciation benefits. Fast forward five years and she will be able to utilise the new found equity as a larger deposit for her home in southern Sydney.
It's not a complicated equation, although it does take some foresight and courage to invest interstate.
The rewards are out there, it's just a matter of taking the first step.