Rentvesting your way to an investment portfolio

Rentvesting your way to a property portfolio

Housing affordability is of growing concern to Australians who are eager to enter the property market. It is of particular concern to those who would like to own and live in their dream suburb, however do not have the assets and income to finance their dream home. With no sign of Australian housing prices slowing down, it is becoming increasingly difficult for would-be first home buyers to buy and occupy in a suburb that appeals to them.

In recent years we have seen a trend that seems to cut through this hurdle for first home buyers. Particularly popular amongst millennials, rentvesting is a trend that suits savvy first time investors who would like to enter the property market without sacrificing their desire to live in the suburb of their dreams.

The term ‘rentvesting’ refers to the investment option in which property buyers invest in an affordable suburb while continuing to rent and live in a suburb they prefer. The trend is not only a last resort option for investors that are financially locked out of their preferred suburbs, it can also enable investors to make smarter property investment decisions. As Australian house prices continue to rise and rental yields steadily fall, rentvesting is becoming a wise investment option for many different types of investors.

How to build a property portfolio through rentvesting

Creating a thriving property portfolio through rentvesting relies on maintaining a smart investment strategy.

  1. Choose the right property and area in which to invest. It’s important to select an area with large growth potential. Understanding the property market cycle will help you identify a suburb’s growth phase. Depending on the area, you may also want to consider a property’s proximity to schools and the property’s walkability score.
  2. Consider your own rental expenses. Calculating your rental expenses against your investment property’s rental yields and future capital gains will help you to calculate affordability and potential investment return.
  3. Get your tenants to pay your mortgage. The aim of a wise rentvesting strategy should be to have your rental returns paying off the majority of your mortgage repayments. This will allow for more financial flexibility.
  4. Seek professional advice. The most important step to making successful property investment decisions is to speak to a professional advisor. A property advisor will help you identify ideal suburbs in which to invest and can help you to create a tailored property investment strategy.

If you would like some advice for creating your own rentvesting strategy, talk to CPS Property today.