In a time of strongly rising property prices, it’s understandable that many young people become frustrated at their chances of purchasing real estate.
However, history shows us that market cycles move through peak periods that can last for a few months or a few years all the time – yet many would-be property owners still manage to secure a holding.
How do they do that? Well, it’s usually by being more flexible with their decision-making, including location selection and whether they actually need to live in the property or not.
Since the boom of the Sydney market began in the 2010s – which was actually nearly a decade ago now – many young people have been considering a relatively new type of property investment strategy to ensure they could start to create wealth in the face of high real estate prices.
Instead of potentially being stuck on the sidelines because of the rising property prices – which don’t seem so high now, do they? – they chose to commit to property investment to improve their financial futures, but without having to make major lifestyle concessions.
What I’m talking about is rentvesting, which is when you rent in the location of your choice but purchase an investment property or two elsewhere.
Often, people can afford to rent in more desirable locations, but would struggle to purchase property there anytime soon, just think of Bondi or Manly as two examples.
In fact, the rise of the rentvestor is becoming more popular each year with about 37 per cent of first-time property buyers indicating they had followed this strategy in the 2021 Property Investment Professionals of Australia (PIPA) Annual Investor Sentiment Survey.
Likewise, about 54 per cent of investors said they would consider rentvesting as a property investment strategy in the survey.
In essence, rentvesting is all about making your money work harder for you via property ownership, without having to make significant sacrifices while you are young, such as living on the outskirts of the city or miles away from all of the fun things that you like you do.
So, how does rentvesting work in practice? Well, two of my recent clients are living and breathing proof of it.
Early last year, two clients were referred to me from one of the trusted mortgage brokers that we work with.
This young couple were newly married and happy to continue renting in a popular inner-city location in Sydney, but at the same time they wanted to build a robust and diversified investment property portfolio.
After an initial consultation and strategy session, it was agreed that the rentvesting approach was best suited to their needs and lifestyle.
After detailed location analysis and assessment, we then identified inner Brisbane as an excellent opportunity and they secured a property there in mid-2020, which was the ideal buying timeframe given markets were still quite subdued at the time.
Fast forward to early 2021, and these clients experienced a significant equity uplift in their Brisbane property.
In fact, that property has increased in value by about 30% per cent since we helped purchase it for them last year.
This capital growth jump meant they were keen to add to their portfolio sooner rather than later, whilst still enjoying everything that their chosen home suburb has to offer for young renters such as themselves.
So, after working with the couple again, we helped them to secure a quality real estate asset in regional Victoria earlier this year.
As you can see, by adopting a rentvesting approach, our clients were able to build a $1 million-plus property portfolio in less a year – and during one of the strongest periods of price growth ever recorded in this country.
Not only have they made huge in-roads into their future financial positions, but they have done so without impacting their lifestyle – that’s a win-win result in anyone’s language.