Over the past several months, the term ‘Rentvestor’ has quickly become a part of our vernacular, because property analysists realised that many first home buyers are actually entering the property market as investors. They’re doing this as an innovative way to get past the issue of housing affordability. Many of these ‘rentvestors’ are still living at home or flatting in share houses with friends to keep their own living expenses low, and they’ve purchased property that they then rent out. The tax regime in Australia has long been favourable to property investment too, so these savvy young buyers are able to take advantage of some landlord tax breaks too.
And this just goes to show that where there’s a will, there’s a way.
Three more clever ways to get into the property market are:
1. Buying with others
Buying with friends or family – that is, pooling funds for a deposit and then either living together or renting out the property is a great idea, and as more people choose this option some of the larger lenders have actually developed tailored loans for this particular purpose. The only word of caution here is to make sure that each party has an exit strategy so that if one buyer needs to pull out at any stage, the other buyers know where they stand in relation to the property and what steps need to be taken if this occurs. If you all agree to an exit strategy before you commit, then there’s a simple process down the track if circumstances change, to protect everyone involved from unnecessary emotional and financial stress and the possibility of losing significant sums of money.
2. Accessing family equity
If Mum and Dad or Aunty and Uncle own their own home and are prepared to go guarantor on a loan, then this can make it easier to purchase. Family Equity loans allow family members to offer up their own home as security, leaving the buyer (also known as the ‘principal borrower’) as the sole name on both the loan and title – meaning, if you’ve used the equity option, you still buy the house in your own name. This can be a great option for anyone really struggling to save for a deposit and can help first home buyers to avoid mortgage lenders’ insurance too, which can be a costly expense over the course of a loan.
3. Buying out of town
Rural and regional areas are definitely a cheaper alternative to buying in the city. This is not the right strategy for everyone, but it is something to consider. Places like the Central Coast, north of Sydney have become popular for this very reason – transport is available into the city and if you’re prepared for the long daily commute then the benefit can be a lower mortgage and a weekend beachside lifestyle. After a few years, this property can then act as a stepping stone into the city because you will have built up equity in your home. If you choose not to live in the place you purchase, just make sure you buy somewhere that has good rental yields.
The most important part of buying though, is getting the most suitable loan. We can help you find a loan to match your buying strategy, so talk to us.