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New research has found that over half of investors are considering rentvesting in 2020. Here’s what you need to know before embarking on this strategy.
Described as a strategy whereby an investor buys in one location and rents in another, “rentvesting” is becoming increasing common in Australia’s property market.
In fact, according to the 2019 PIPA Investor Sentiment Survey, 63 per cent of investors are considering rentvesting in the New Year.
Many have touted its benefits, including Justin Picker, who spoke on The Smart Property Investment Show earlier this year.
“If you’re able to live at home, or you’ve got cheap rent and stuff like that, it’s certainly something I would recommend – and build a property portfolio as well so that you’ve got some assets building for you in the background,” Mr Picker told host Phil Tarrant at the time.
“I just think it gives flexibility, and once we’ve got a little bit more certainty and those type of things, I’ll probably look to use that equity as a deposit for a house later on down the track.”
Particularly for people who cannot afford to buy in the major capital cities, it is not uncommon for investors to rent where they want to live in these cities, in order to make money while working harder on their investments, according to Mr Picker.
“I suppose the idea of rentvesting to me is certainly a way to go.”
However, despite the trend being picked up more and more, PIPA chairman Mr Koulizos issued a warning to novice investors who tried to follow this strategy without expert advice.
He said investing interstate required a strong understanding of local markets and cycles as well as state-specific legislation that can impact rental returns.
“Going it alone when investing in any property, anywhere is always a risky move,” Mr Koulizos said.
“These risks skyrocket when someone tries to do that in a location that they don’t understand, plus they often buy sight unseen because of the distances involved and wind up with a dud investment in an inferior location.”
Mr Koulizos said serious investors always use Qualified Property Investment Advisers (QPIA), especially when buying in locations hundreds of kilometres from their own backdoors.
“QPIAs can recommend the best locations as well as dwelling types for investors because they have the skills, experience as well as superior research and networks across the country,” he said.