Following on from my last blog, “The Year Ahead for Property and Nyko”, I was going to talk about the Melbourne market, but some figures have been presented to me recently that I think will give you much more value.
Traditionally, due to the depth of our research and the profile of an investor overall, most of the clients that buy from Nyko are aged between 35-55 years of age, already own their home and are buying their first or subsequent investments.
However, recently we have seen another group emerge and they’re gaining in popularity. This group are known as Rentvestors. They are typically Gen Y and first time buyers who purchase an investment property in a more affordable area whilst continue to rent the property they currently live in, in their more preferred suburb.
The Rise of the Rentvestor
In early 2016, rentvesting was something of a novelty and we noticed a few people within this group make enquiries and purchase property. However, ever since, the number of rentvestors have been increasing and over the last three months we have seen a dramatic rise in enquiries from them.
In the last quarter of 2016, 19% of our clients have been rentvestors, which is a huge number in comparison to what we have seen in previous years.
So, why are more and more Australians turning to rentvesting?
Although I do not match the typical profile of a rentvestor, I am in fact one. And my reasons are similar as to why your average younger Australian is turning to the property strategy of rentvesting.
After buying my first home at 25 and living within that property, I have never owned a property I have lived in since. This is a yearly running battle with my wife, who of course wants to own the property we live in due to the traditional notion of owning the family home . But my reasoning to her and the reason most rentvestors do the same are simple.
Reason 1 – Lifestyle Choice
Firstly, I can’t afford to own the property I live in within the location that I want to live. I have chosen lifestyle first, being close to work and the cafes, restaurants and shops I have been accustomed to. That is what is most important to me.
This is also the main reason most rentvestors decide to invest in property first. They simply cannot afford to buy a property in the most desirable locations in their cities, especially if you are from Melbourne or Sydney.
Reason 2 – Rentvesting is Financially Better
Secondly, from a purely financial standpoint, owning an owner-occupied property, unless you own several investments, just doesn’t make financial sense. Rentvesting is simply financially better.
Renting the property you own leaves me more capital to buy investments which reduces my taxable income. I often tell my wife that living in the property we own will cost us about $10,000 a year NET in tax. That is the cost for us to own our own home.
Reason 3 – Rentvesting Increasing in Popularity
Finally, rentvestors are becoming a major ownership group and they are doing it for the right reasons. Remember, many Gen Y’s became adults during the GFC so they are lot more careful with their money compared to the Gen X’s or even the Baby Boomers.
Get in Touch
If you have any rentvestors that want to learn more about how to select a quality property, I highly encourage you to invite them to the next Nyko investor event in your state.
Thanks again, and I hope you have a great weekend. I’ll be back here in two weeks with more useful insights.