With the first month of the new financial rear almost done, rentvesting has been suggested as a strategy for investors facing a challenging Sydney (or another major city) rental market.
‘Rentvesting’ is a fairly common term these days in investor circles. Basically, it allows you to rent a property and live in the area you want, while owning an investment property in another area, potentially off setting your cost of living.
Ideally you will be renting out your investment for more money than the property that you are renting.
In Sydney, inner city locations are experiencing high vacancy rates, affected by, amongst other things the lack of international students and outward migration from tree changers, and this can also be seen in mid to high density markets in other major cities.
A strong trend out of the cities has been identified. Rents are increasing in outer-city locations and in regions, and more so for houses with more space than smaller units. Of course, both the need and acceptance of working from home has freed up many city residents to move further out.
Unfortunately, this has led to people who have been permanently priced out of buying now living in areas where renting is increasingly unaffordable.
There are markets in different locations across Australia where it is becoming cheaper to buy than to rent.
Some investors are looking at this and deciding to stay put in the city to live but buying elsewhere.
So, they work in the city, they like the lifestyle and don’t necessarily want to leave. They would be stretched to come up with the deposit needed to buy where they want in the city, so they continue renting. They look to a regional location, where it’s much more affordable and they can get a good rental return.
You can see why the rentvesting strategy may work well for them.