Rentvesting – Is it a Good Idea?
“Rentvesting” – it’s a term that you may not be familiar with. But for a growing number of Australian homeowners, it’s becoming a familiar word that can mean a solid investment strategy. Rentvesting allows them to live in the suburb they prefer, while paying off a mortgage in a suburb they can afford. While that may sound a little too good to be true, information from the Australian Bureau of Statistics shows around 15% of Aussie renters are now rent investing.
But what is rentvesting? What are the benefits of rent investing? Should you use a rentvesting calculator? And how can an experienced mortgage broker help you become a successful rent investor?
What is Rentvesting?
What is rentvesting? The word itself is (unsurprisingly) a blend of “renting” and “investing.” It was coined to describe a property investment strategy where individuals rent a home in their preferred location while also investing in property in another area.
What’s the purpose of rentvesting? It gives people the opportunity to live somewhere that they can’t afford to buy. The median house price in Brisbane soared by over 13% during 2023. With numerous infrastructure projects underway, immigration increasing and the Brisbane Olympics around the corner, property prices in the city are expected to go nowhere but up.
This has led to some buyers being priced out of the inner-city market. But by rentvesting, these same buyers may be able to purchase an investment property in a regional or “bridesmaid” suburb, while continuing to live closer to the city.
What Are the Benefits of Rent Investing?
Rentvesting can be highly beneficial for several reasons, including:
Flexibility
Allows you to live in desirable areas without the commitment of homeownership.
Investment Opportunities
Enables you to invest in potentially more affordable or high-growth areas.
Diversified Portfolio
Helps you build a diversified real estate portfolio with the potential to buy property in different locations.
Tax Advantages
Take advantage of the potential tax benefits associated with property investment.
Adaptability
Ability to adapt to changing life circumstances, such as job relocations.
A Foot on the Property Ladder
A viable pathway for you to enter the property market.
Wealth Building
Potential to build long-term wealth through property appreciation and rental income.
How Does Rentvesting Work?
Let’s consider a hypothetical example of how rent investing can work. Imagine you’re a young professional working in Brisbane’s CBD. You enjoy the urban lifestyle and being close to work, however, property prices in this prime location are high. Instead of compromising your lifestyle to afford a mortgage, you decide to embrace rentvesting.
You rent a suitable apartment in Brisbane’s CBD while also investing in a more affordable suburb with growth potential, such as Chermside West. This allows you to enjoy the city life you prefer while strategically building equity through property investment. As Chermside West develops, your investment grows, offering both immediate lifestyle benefits (through increased rental yield) and long-term financial gains.
Should You Rely on a Rentvesting Calculator?
Considering the complexities involved, some borrowers will use an online calculator to see if rentvesting is a viable option. These calculators can be useful tools to help you assess affordability and potential returns when rent investing. This kind of information is crucial when you’re making complex decisions about simultaneously renting and investing in real estate.
But remember that these online calculators will only provide generic information. And the devil is in the detail around what to include. Things like tax deductible interest add backs for the investment debt you will have and suchlike. For a more detailed analysis, you’re much better off consulting with a mortgage broker who understands the intricacies of rent investing.
Talk to a Broker About Rentvesting
It can be tough to get a foot on the property ladder in the current real estate climate. However, rent investing offers a strategic solution. If you’d like help navigating the complexities of rent investing, talk to the expert team of brokers at North Brisbane Home Loans.
We can offer finance solutions that are tailored to your unique goals and circumstances. Whether you’re keen to find out more about “what is rentvesting?” or you’re ready to get started on your rent investing journey, contact us today for some free expert advice.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
