Property Rentvesting – By Phillip Richards

If not even COVID19 could slow down the juggernaut that is the Melbourne property market, then what can?

I speak to a lot of people who are looking for advice on how to break into the property market.

In fact, as a goals-based financial advisor, I spend a lot of time talking to people about property.

And whilst there is a wealth of investment opportunities outside of property that are worthy of consideration, there’s no denying that in Australia, the lust for bricks and mortar is very much a part of the national psyche.

We all want a place we can call our own.

Whether I’m helping someone attain their first or their 10th property, there is, in general, widespread disbelief at how strongly the Melbourne property market is performing after Victoria’s lockdown-riddled 2020.

Any hope first-home owners harboured of being able to access property on the cheap with all that money they saved by not travelling overseas or eating out with friends every second night have been dashed.

In the March quarter, house prices in metro Melbourne reached the $1 million mark for the first time, rising 8.8 percent from the previous quarter to $1,004,500.

That’s not to say that breaking into the property market is impossible for first-home buyers.

There are plenty of opportunities in the outer suburbs and regional areas.

The problem for many of these first-home buyers – who have perhaps grown up in Melbourne’s leafy inner-suburbs or who have been renting and living in some of Melbourne’s most in-demand pockets – is that they don’t want to live in these outer suburbs or regional areas.

And I should know because that just about sums me up.

I love living in the city.

It suits my lifestyle, my social network, and my work.

I need to be near the vibrancy of the city and so that is what I do.

I live in the city, where I rent a brilliant apartment that works within my budget and has all the amenities that I need, and I invest in property in the areas I can afford to buy property.

Would I live in Bendigo? As lovely a part of Victoria as Bendigo is, it’s not where I want to live personally.

But would I invest in a property in Bendigo, where the median house price rose by 9.9 per cent in the 12 months to December 2020?

You bet!

This is called ‘rentvesting’.

And I think it’s time we had a long, hard conversation about why more Australians should seriously consider doing it as well.

As Australians, we place an inordinate amount of pressure on ourselves to own the patch of dirt (or slice of sky if apartments are your thing) we live on.

It’s ingrained into us, as if it is the only measure of financial success.

But as part of a well-planned and executed financial strategy, reinvesting can be a fantastic way to enjoy all the benefits of property ownership, whilst living where you want to live.

By taking advantage of cheaper property prices in the outer suburbs or regional areas, you can attain an asset that is instantly cashflow positive, provides some great tax benefits and capital growth over the long term, whilst renting in the suburbs that you want to live in.

“Rent” is often seen as a bit of a dirty word.

People hate the idea of “paying someone else’s mortgage”.

However, there are also many positives that come with renting over the long-term, whilst investing in more affordable areas.

From my own experience, by committing to my lease for the long-term, I have negotiated a reduced rent with my landlord saving me significant money in the long-term.

I have also worked with clients to help implement strategies that incorporate rentvesting into a wider financial plan.

By using surplus savings and funds to invest in a stock portfolio that covers their rent, whilst their investment property (or properties) is providing a yield on top of the salary that they earn, we are helping clients kick significant financial goals.

If you or someone you know is interested in learning more about how rentvesting works, and how it might apply to you or your friend, please don’t hesitate to reach out and start a conversation.

– Phillip Richards (Managing Director & Financial Advisor)

The team at Endorphin Wealth and myself are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by big banks and financial institutions, so the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers that can be tailored to our client’s goals and needs. We have offices located in Sydney and Melbourne, where you will be able to find a financial advisor that is suitable for you.

For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *