In an effort to break into the property market, a new breed of investor has emerged. The rentvestor is an investor who rents a property in a desirable locationdue to its lifestyle benefits, but who has bought a home in a more affordable locationin order to build their wealth.
What is a Rentvestor?
The rentvestor is typically a younger, first-home buyer who is seeking to maintain a lifestyle closer to the inner city or central business district. The rentvestor trend was first identified by LJ Hooker who published a white paper on key trends within the property market. According to LJ Hooker, most rentvestors are aged under 30-years and they dont wish to relocate to buy a home that they can afford, so theyve elected to do the next best thing, which is to continue renting where they are so they can maintain their current lifestyle, and to then buy an investment property in a more affordable suburb.
What Drives a Rentvestor to Rent and Buy an Investment Property?
Home affordability and maintaining a quality of lifestyle are the two biggest drivers of the rentvestor. Rentvestors want to be close to work, pubs and clubs, and near to friends. But, the cost of property in inner city locations has made it unaffordable for younger home buyers to purchase property in these locations.
According to home loan data, the national average size of a home loan for first home buyers was $326,000 in March 2015, this was a growth of 14 percent over the last 5-years and 58 percent since 2005. Increases in home loan sizes have also made it harder for first home buyers to save for a deposit. Realestate.com.au add to this when they state that some 23 percent of property buyers, under the age of 30-years, are looking to buy an investment and 16 percent of first-home buyers are seeking to buy an investment property.
What Investment Strategy are Most Rentvestors Using?
Most rentvestors are seeking to buy an investment property that will allow them to make a strong return on their investment. Their capital gain will then allow them to buy a property where they wish to at a later date.
Rentvestors who are savvy are said to be buying, and then holding, their investments with their strategy being to invest long-term. These rentvestors say that they are not just looking to buy a home at a later date, but they are seeking to build wealth.
For rentvestors who are seeking to build substantial wealth, they are electing to pool their resources with other rentvestors, such as friends or work colleagues and they are buying property together. By pooling their resources, these rentvestors are able to buy a home sooner.
Some rentvestors are electing to buy new homes in newly created estates in new suburbs. Off-the-plan property enables rentvestors to buy an investment property, but not have to pay for the home until its complete.
Other alternatives, are for rentvestors to buy smaller property to get their foot in the door, or if they have trade skills, then to buy a property that needs some work. This allows these rentvestors to spend some time and money renovating their property over time with changes to rented property typically adding value to the home. This, in turn, then enables these rentvestors to ask more for their property with each change they make.
However, the most important consideration if youre electing to buy a property that needs renovating, is that you need to have a property inspection before you buy. This will allow you to avoid buying a home that is unsound and may cost you thousands to repair. Older properties typically are on larger blocks, so these homes can possibly be subdivided at a later date with another property being built on the subsequent block or blocks.
Are you looking to buy an investment property? Then contact eChoice, we can help YOU find the right investment property loan.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!