Here’s the thing: I’ve been rentvesting for three years now and I’m not a 20-something who’s priced out of the market.
In fact, I’m in my 30s, married with kids, and have more than 20 properties in my portfolio.
Homeowners to rent-vestors
Ten years ago we bought a home in Sydney that we lived in for seven years, which we used as collateral to build our investment portfolio.
As our family grew, we needed to upgrade.
We had a choice whether to upgrade our principal place of residence but we would have to stop investing, which just wasn’t an option.
The other more attractive alternative was to continue to grow our portfolio and rent somewhere instead.
Given the yields were dropping in Sydney and the property prices were rising, it just made more financial sense to me to continue to invest in more affordable areas as well as locations with better yields.
The rental property that we live in is probably worth $2 or $3 million today, but our rent is only a fraction of what the mortgage on it would be.
It doesn’t take Einstein to work out which is the better strategy.
It’s not about not being a homeowner – one day
I have a lot of Sydney-based clients who have same dilemma as we once did.
However, they’re not writing off being a homeowner completely.
What they’re opting to do instead is build up their portfolio in more affordable locations now and perhaps sell some down in a few years time to buy into the Sydney market.
In fact, they are temporary renters because it’s a means to an end.
Rent-vestors as an investment strategy isn’t necessarily a forever one.
Given Sydney prices are stabilising, and falling in some areas, then in the middle-term those rent-vestors may become homeowners who also happen to be property investors, too.
For us, we have no plans to become homeowners again anytime soon.
Initially, my wife Mandy, had some hesitations about renting but she’s a total convert these days.
She was worried about a perceived lack of security as a renter, but what we’ve learned is that landlords just want a stable tenant, who pays the rent on time, and who looks after the property.
Just like we do with our own portfolio of investment properties.
Today, Mandy doesn’t even mind if we have to move to another rental property, which is a big change because we had never even rented until three years ago.
Rentvesting as an investment strategy works on a number of levels, especially the ability to secure finance as well as maintaining lifestyle while also investing.
Investing in more affordable locations, such as Brisbane as an example, means that you need less of a deposit to secure a loan.
You still can pick up good properties – and I mean houses – in Brisbane around the $400,000 mark, which seems absurd to us Sydneysiders.
When it comes down to it, there are still some old school beliefs about renting.
It takes a mindset shift for a lot of people, especially those from conservative backgrounds or ethnic families like me.
Owning a home is drummed into us from the age of 18 months!
Today, the mindset should be about owning property – not necessarily a “home”.
And if rentvesting is the strategy that enables you to do that, then that’s a very good thing.
I know for us, it has been one of the keys to our financial success so far and will continue to be for the foreseeable future.