The Pros Of Becoming A Rent-Vestor
There are not many people out there who aren’t itching to buy their own home. It’s part of the Kiwi dream, right?! Who doesn’t want a slice of their own piece of paradise. But with slow wage growth and exceedingly high house prices, it’s getting harder and harder to become a traditional homeowner – which is why some people are opting to become rent-vestors instead.
WHAT IS A RENT-VESTOR?
A rent-vestor is a property investor who generally chooses to buy outside the city or suburb where they live. It simply gives them the option to buy in a location that performs well but may not be where they personally want to live because of work, social commitments or other lifestyle requirements.
If you’re struggling to purchase your first home, here are three reasons why you may want to consider rent-vesting.
1: YOU WON’T RISK BEING PRICED OUT OF THE MARKET
More and more people are being priced out of the property market due to not being able to purchase the type of home and location they want to live in. For example, waiting until you have the financial means to buy in the inner-city suburbs may see you miss the boat completely. But on the flip side, rent-vesting allows you to rent in an area that you could not afford to buy in, while having an income producing asset in an area that serves the needs of your tenant. It’s a win, win!
2: YOU’RE CREATING A PATHWAY OF WEALTH
With a booming property market, acquiring a property now means future growth for tomorrow. Having a rental property grow in value means you’ll be able to use that equity to later purchase your own owner-occupied place or use it to buy more investment properties down the track. Either way, those options will be off the table if you choose to do nothing.
3: YOU CAN BECOME A SUPER SAVER
Not only are you able to generate additional income by being an investor through the returns from rent, but you’re also able to save A LOT of money by not personally living in the property. For example, if your mortgage and expenses are all covered by rent (we call this being positively geared), then you can opt for a shared living situation (either with family or flatting with friends) where you’re only paying for a room, not an entire house.
HOW TO BECOME A RENT-VESTOR
While this type of strategy can be a highly effective way to get you on the property ladder and closer to achieving your financial goals, there are still many moving parts that must be managed correctly. For instance, getting the right type of finance and structuring your loans accordingly will be an important component. On top of this, you’ll need to do rigorous due-diligence on where to buy, as well as getting the right property manager in place to ensure your asset is being looked after.
The best place to start is by assessing your overall goals. Where do you want to be in five or 10 years from now? Your first property will often determine your ability to acquire more real estate in the future, so having a clear pathway around how you’ll grow your portfolio is key even before you buy your first investment.
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By Sue Irons
CEO – Positive Real Estate New Zealand
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