Getting on the property ladder is a key milestone in many people's lives, but not everyone chooses to settle down in their new home once it's purchased.
In fact, a growing number of Australians are 'rentvesting', which is where you buy real estate in one location but choose to continue renting somewhere else. A Mortgage Choice survey from 2015 indicated approximately 36 per cent of Australians fit into this category – up from 21.2 per cent the previous year.
But what makes rentvesting such a popular option? And do you fit the typical profile of a rentvestor? Let's take a closer look at some of the reasons why you might choose this approach.
1. House prices are too high in your dream location
The monthly CoreLogic Home Value Index showed that property prices in Sydney and Melbourne had climbed 11.1 and 11.5 per cent, respectively, year on year by the end of May 2017.
Moreover, the median value of real estate in the NSW capital is currently $872,300, while homes in the Victorian capital fetch $665,000 on average. For many people, particularly first-time buyers, this is an expensive entry point into the market.
Rentvestors typically purchase an investment property in affordable suburbs where prices are lower, but choose to rent in more expensive inner-city areas that better suit their lifestyle.
Rentvesting can therefore give you the best of both worlds; you can invest in a tangible asset for your future while still enjoying the cosmopolitan dream in some of Australia's most vibrant cities.
2. You're young and live in NSW
You might think that buying an investment property is more common among older generations, such as baby boomers, but recent research has shown young people are the driving force in the market.
22 per cent of Generation Y, those aged between 18 and 34, claim to own an investment property.
ING Direct figures found that 22 per cent of Generation Y, those aged between 18 and 34, claimed to own an investment property. Meanwhile, 19 per cent of baby boomers and 20 per cent of Generation X said the same.
Furthermore, NSW residents are among the most likely people in Australia to purchase investment properties. Twenty-two per cent of individuals in the state own one, with Western Australia the only state to match this figure.
"What's interesting is that while there are continued questions around affordability and the challenges for younger generations in getting onto the property ladder, it's actually Gen Y that is leading the property investment pack," said Head of Third Party Distribution at ING Direct Mark Woolnough.
3. You're required to move around a lot
Whether it's for your job, family commitments or a penchant for travelling, you may not want to stay tied to one location for the foreseeable future.
Renting provides you with the flexibility to move cities, states or even countries more quickly and easily than if you're living in a purchased property. So if you're not ready to put down permanent roots, rentvesting can give you the freedom to upgrade or downgrade according to your circumstances.
Furthermore, an investment property often provides an income stream from rent that you can use to build wealth or fund other ventures. You may also be able to enjoy tax benefits by leasing out your property.
However, it's important to talk to an experienced investment property specialist to find out what is the best option for your specific requirements.
Would you like to learn more about buying the ideal investment property? PI Store can guide you every step of the way, so please get in touch with a member of our team to see how we can help you build a better future for you and your family.