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USA Real Estate Blog

Tackling The Affordability Crisis With Rentvesting

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Australia’s $6.6 trillion residential housing market has generated significant wealth, but many may struggle to find appropriate accommodation in the future without implementing alternative housing strategies such as ‘Rentvesting’. This process of renting where you need to live, whilst investing in property elsewhere, provides an affordable means of accommodation for those whose commitments require them to live in a particular area.

Housing affordability is a common problem in a country where 8 out of 10 people live on or near the Eastern Seaboard, forcing strong house prices in our capital cities (especially Melbourne and Sydney). The offshoot has meant many Australians continue to be priced out of the market, particularly in these areas.

Should Australians just give up on the idea of creating wealth through property ownership?

Investment into residential dwellings provides much of the bedrock of our wealth and there’s no indication that this will change anytime soon. It doesn’t mean, however, that the Great Australian Dream is over — buyers just need to look at finding a new way of achieving home ownership. There’s been an increasing trend towards purchasing an investment property in a more affordable area, whilst renting a principal place of residence — ‘Rentvesting’.

‘Rentvesting’ is a strategy I personally adopted in the early days of my property investment journey and I’m now seeing a number of clients doing the same with remarkable success. They’re able to enjoy all the benefits of living where they want, but can’t afford to own. It keeps them connected to friends and loved ones, in areas with a vibrant cafe culture and various amenities right on their doorstep. Take Lou for example. She lives in a beautiful beachside property and rents out her residential investments. This strategy affords her the lifestyle of her choosing, but means she’s still investing in her future.

In other cases, ‘Rentvesting’ provides a foot on the housing ladder for people who need flexibility due to work commitments, such as living interstate for a time before returning to the city of their choice. I’ve seen this with Sandra, however she’s taken a more international approach. She enjoys a relaxed lifestyle in Mexico, whilst investing in residential housing within Australia.

In a more extreme case of ‘Rentvesting’, when Hailey lost her job through redundancy she decided on a nomad’s life in a van, whilst holding onto her investment property. Until that point, the bank was about to foreclose when she borrowed my book from the library and spent her last $1000 renovating her unit before renting it out. She was able to make the rental cashflow cover her mortgage repayments. This novel solution meant she didn’t have to sacrifice the long-term rewards of future capital growth by having to sell when her money problems struck.

Using ‘Rentvesting’ to leverage home ownership into the future

Those using ‘Rentvesting’ as a strategy to get into the housing market are buying in the more affordable areas of our capital cities and regional towns. It doesn’t mean they’re giving up on owning their homes forever — in some cases, they’re just taking the scenic route to get there! Their investments provide cashflow from rental income, whilst continuing to grow in value. Equity from these investments enables ‘Rentvestors’ to add to their portfolios down the track, or tap into it and finally buy that much wanted home of their own… exactly where they want to.

While affordability continues to be a real issue for many Australians hoping to get their feet into the property market, ‘Rentvesting’ is fast becoming a popular solution. It’s certainly a different model to what past generations may have employed, but means being able to live where you want (or need) and invest elsewhere. It’s a proven means of building wealth with all the future benefits of home ownership still to come — just as fruitful as the traditional model, but with a twist!

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