Chris Childs


Is rentvesting the right move for you?

Have you heard of rentvesting? It's a popular new method of building wealth for those who want to take advantage of the strong value gains that Australia has experienced over the last few years. But is it right for you? Here's a breakdown of what it means, and whether it could be the best way for you to work your way towards financial independence.

Is renvesting the key to a wealthy future?Is rentvesting the key to a wealthy future?

What is the current property market?

Property prices are going up, interest rates are going down, and everybody is trying to jump on board while the good times are still rolling.

First, let's look at the current real estate environment in Australia. Properties have been growing in value across most capital cities for years. Some regional areas have been growing as well, while others have been dropping – but in general, it's been an excellent time to be an investor in terms of capital gains.

At the same time, interest rates are at historic lows. The official cash rate currently sits at 1.5 per cent, the lowest it has ever been, and that has been passed down through a lot of lenders to the consumer. Meanwhile, the advent of interest-only loans has made it even easier to step onto the property ladder without much hassle.

There's a reason the Reserve Bank has recorded that home loan approvals have been ticking up since 2010 – property prices are going up, interest rates are going down, and everybody is trying to jump on board while the good times are still rolling.

What is rentvesting?

However, those rising prices have also put first-home buyers on the back foot. According to a First Home Buyers Australia survey, 85 per cent of first-home buyers found that the toughest hurdles to get over for their first purchase were all related to money. Deposits, stamp duty and unaffordable housing specifically.

No wonder, really. With homes at a $1 million median or close to it in two of our largest capital cities, even lower quartile homes near Sydney or Melbourne would be tough to snatch up for young Aussies with lower incomes. But rather than simply giving up, some of them have thought outside the box and chosen rentvesting instead: buying a home in the more affordable regions, then renting a home themselves nearer the city so they can still get to work easily.

This gives them the same lifestyle and opportunities that living in the centre of the city would, but still gets them onto the property ladder and subsidises their mortgage repayments with rental income. They get all the benefits of capital gains, without having to live in their first home themselves.

Are you ready to rentvest?Are you ready to rentvest?

Is rentvesting the right move for you?

This could be the reason why a recent ING Direct survey found that a greater proportion of Gen Y have investment properties compared to Baby Boomers! You might think that the average property investor is middle aged or retired, but the reality is that young people are leading the investment charge – and rentvesting could be their edge over the competition.

Is it right for you? If you don't already own your own home, it could well be – but only with the right advice. By paying both your own rent and a mortgage, you have to be especially careful with managing your money and reducing your debt as quickly as possible.

That's where Think Money can help. We have a whole team of property mentors who can make sure you are investing your money the right way, in the right places. Get in touch with us today or come along to one of our seminars to find out how we can assist you to build wealth.