Why investing while you rent makes sense

The term 'rentvestor' has been a bi-product of the booming Sydney and Melbourne property markets. Would-be first home buyers have been priced out of the respective Sydney and Melbourne markets with 40 per cent and 25 per cent growth over the past three years respectively.

As a result, we are experiencing more and more motivated first-time investors looking to invest further afield in the south-east Queensland markets, while continuing to rent. These rentvestors are using their hard-earned deposits to gain a foothold in the property investment market, and why not? It works!

A great example of rentvesting is below.

This particular client had an $80,000 deposit saved up and quickly realised that this would not be enough to invest in her desired area of Cronulla, where the average two-bedroom unit price is around $650,000.

But rather than throwing her hands up and saying 'I give up', this investor came to us to discuss the option of investing further afield in south-east Queensland.

The client is renting paying $400p/w and did not want to contribute anything further towards the mortgage repayments beyond the $80,000 deposit. Fast forward two months and that is exactly what she achieved. A five-year-old four-bedroom brick home 40 minutes from the Brisbane CBD for $300,000 and yielding six per cent.

The plan for her now is to continue renting for the next five years while her investment appreciates and does not cost her a thing – in fact, it makes her approximately $2,000 in depreciation benefits. Fast forward five years and she will be able to utilise the new found equity as a larger deposit for her home in southern Sydney.

It's not a complicated equation, although it does take some foresight and courage to invest interstate.

The rewards are out there, it's just a matter of taking the first step.