Is Rentvesting a Viable Option to Consider?

What is Rentvesting?

Have you ever come across the term rentvesting? Many young couples and families put off buying a primary residence right away. Rentvesting is an approach to wealth-building that can serve as a stepping stone towards purchasing a home in the future. The idea is to rent in a desired location while purchasing an affordable property elsewhere to rent out to a tenant. The rental property then provides an additional source of income.

Why is rentvesting a popular option?

Securing property remains a major goal for many Australians. Before committing to a home loan for a primary residence, exploring rentvesting can be a useful step. Purchasing an investment property before buying a home may seem unconventional, but it provides a way to enter the property market.

Here are some of the reasons why rentvesting is popular:

Rentvesting generates rental income

First-time buyers entering the housing market at an earlier stage can use rentvesting as an entry strategy. The concept involves delaying the purchase of a home to invest in a rental property instead. Collected rent can then assist with paying the mortgage on the investment property.

Rentvesting provides flexibility in housing choices

Many buyers settle for a smaller property simply to fit a lower budget. Rentvesting can offer an alternative. Renting out an investment property in an area with strong tenant demand can offer cash flow to help build equity for a future home purchase.

Rentvesting makes financial sense

When buying an investment property, buyers do not necessarily need to compromise on location for their own lifestyle, as investment properties may be more affordable in growth areas. Choosing a property with solid rental potential can help build funds over time.

Rentvesting can be a stepping stone towards purchasing a first home. Despite the potential benefits, there are also trade-offs and financial risks to consider.