Rentvesting: How millennials are getting a foot in the property market while living where they want

In the last two decades house prices have skyrocketed to as much as 16 times the median wage, compared to just four times the median wage in the 1980s.

Rentvesting: How millennials are getting a foot in the property market while living where they want

Priced out of the same property market their parents invested in, millennials and first home buyers are turning to a strategy known as "rentvesting" to own their slice of the Australian dream.

In the last two decades house prices have skyrocketed to as much as 16 times the median wage, compared to just four times the median wage in the 1980s.

For example, in Sydney the median home cost just $64,800 in March 1980. Today that figure sails past $860,000 – far out of line with the normal inflation rate of wages.

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This price gap – coupled with a pandemic-fuelled recession and ever-growing education costs – is forcing younger Australians to think outside the box about getting their foot on the property ladder.

According to Billie Christofi, founding director of Reventon Finance & Investments, "rentvesting" is one strategy that first home buyers are using to grow their wealth.

"Rentvesting is about buying where you can afford and renting where you choose to live," Ms Christofi told 9News.com.au.

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"Life is short so, by 'rentvesting', you can still live the lifestyle you want while making contributions to your savings through an investment purchase elsewhere."

The strategy sounds almost too good to be true: you rent where you actually want to live, and you buy in a high-growth area where you can afford and have tenants and dividends cover as much of the mortgage as possible.

It's not without its risks either – there could be an extended vacancy at your investment property, the gap between what your tenants pay and your mortgage could become too large, and of course there's no guarantee your investment will grow in value.

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Another strategy Ms Christofi sees is partnering with another savvy millennial to pool capital to afford a home deposit.

"Another great way to enter the market is by 'buddying up' with a friend, family or colleague and purchasing a property together. This is a fantastic way to make your first investment if you don't have enough for a deposit on your own," Ms Christofi said.

The big picture, Ms Christofi advises, is moving away from the "pick and stick" property mindset of previous generations and making sure to be mindful of your finances.

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"The Australian dream is no longer about owning one property, in an area you might not even like, and living in it for the rest of your life,' says Ms Christofi.

"There are a number of investment strategies open to young Australians that can help them secure their financial future, even during these difficult times.

"The harsh reality is that most young Australians simply don't have enough capital to afford a house deposit on their own. And now, with many placed on JobKeeper or JobSeeker subsidies which the banks look down upon, the way we look at investing needs to change."

Australia's August 2020 Property Prices*

City:

Quarterly change:

Median Value:

Sydney

- 2.1 per cent

$860,182

Melbourne

- 3.5 per cent

$667,520

Brisbane

- 0.9 per cent

$503,128

Adelaide

- 0.1 per cent

$444,021

Perth

- 1.6 per cent

$443,777

Hobart

+ 0.3 per cent

$490,743

Darwin

+ 1.0 per cent

$393,386

Canberra

+ 1.3 per cent

$636,324

National

- 1.7 per cent

$552,689

*CoreLogic Data, median value includes homes and units

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The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.

Source : 9 News More