What does it take to be a rentvestor in Sydney?
Wed March 07, 2018
Over the past few years, we've seen a new trend emerge in the world of Sydney property buying. As homes have become harder to afford for first-time buyers, many have turned to suburbs further from the city centre, where they can find something within their budget. However, that doesn't necessarily mean that these buyers will end up living in these areas. Instead, many of them continue to rent centrally, while in turn renting out their new property to somebody else.
This is known as 'rentvesting,' and it's a smart way to have your cake and eat it too, particularly if you'd like to get onto the property ladder but don't want to leave a great area where you can't afford to buy.
The trick is knowing where and how to rentvest, and in this article we'll take a look at who Sydney's rentvestors are, and why they're succeeding.
For rentvestors, home ownership is less of an expectation and more of a long-term goal.
Who are Sydney's rentvestors
As you'd expect, rentvestors tend to be on the younger side, with the majority of them millennials from Generation Y (born between 1980 and 2000) the generation of persons born in the 1980s and early 1990s. For this group of Australians, home ownership is less of an expectation and more of a long-term goal. They understand that it will only become more difficult to get onto the property ladder, particularly in high-density areas such as Sydney, and are making their investments now to take advantage of the areas where more affordable homes can still be found.
Lauren Fine, head of home ownership at Westpac, as well as a rentvestor, explains that for younger Australians, there's still an appetite to own property, but not at the expense of a certain lifestyle that comes with living in a big city.
"Renting and investing in property has been an investment strategy for a long time, it's now just become more common for first home buyers because they can't afford where they want to live, but still want to take part in the property market," she explained.
Of course, there's much more to rentvesting than simply finding the cheapest property possible. Let's take a closer look at two tips to keep in mind before you start looking at Sydney properties for sale.
1. The area still matters
Perhaps the most common misconception surrounding rentvesting is that the area, and to a lesser extent the property itself, doesn't really matter. This isn't true at all, as even if a buyer isn't planning on living in a property, they'll still need to be able to generate a decent rental yield off it. That means looking at areas that are affordable because they're further from the CBD, but still appeal to tenants. Without this appeal, it will be more difficult to keep the property occupied, meaning rentvestors will have a mortgage as well as their existing rent to cover off their income alone.
Even if a buyer isn't planning on living in a property, they'll still need to be able to generate a decent rental yield return off it.
2. Identify growth
Another rentvesting mistake is only considering rental yield when looking at properties. It's also important to consider the capital gains that you might be able to enjoy on a property purchase, which means doing your research and identifying properties on the up. There's no one marker of an area that will increase in value over the next few years, but a great starting point is to look for development such as public transport infrastructure, which can have an enormous impact on the desirability of a suburb once completed.
As with all things Sydney property, rentvesting is a complex game, but it can be a great way for first-time buyers to take their initial steps into the world of home ownership. To find out more, contact Laing+Simmons today.