A growing number of couples and families in Australia today are opting to buy a property as an investment in a more affordable suburb, whilst still continuing to rent in the suburb they wish to live in. This is known as rent-vesting.
Many first homebuyers are doing this as a way to get a start on the property ownership ladder, with the added bonus of earning extra income at the same time. Whilst these homes may not be properties that they’d ever consider living in themselves due to location and other factors, buying in more affordable suburbs still gets them a foothold in owning real estate.
Some real estate experts see this as a smart move because it allows homebuyers to earn an income that they can eventually use to purchase their ideal home in their preferred location. Through this route, they are able to enter the property market sooner and start building a property portfolio.
These property investors can be referred to as “rentvestors.”
Reasons for Rent-vesting
One of the reasons Australians are rent-vesting is the lower deposit required to buy an affordable property. Studies have noted that many homeowners are struggling financially while renting and saving for a deposit for their dream home.
Another reason for choosing this route is it allows people to purchase a property at a price they can afford although not necessarily in their most ideal location. Affordability is a priority and time is of the essence.
Also, homebuyers can enjoy the lifestyle they want while renting in a great location and saving for their dream home. This means they can live in their preferred location such as within the city near amenities or somewhere near the beach while their investment property allows them to save for their dream residence.
Rent-vesting can work towards a couple or family’s advantage as long as research and careful planning are made. It would also be a good idea to assess your financial situation first and consult with a financial adviser to better understand the ins and outs of rent-vesting.
While this step may not be the real solution to the housing affordability issue in Australia, it can be a great strategy option.
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