Young Australians are moving away from the great Australian dream, as the path for 2018 is not as simple as working to save for a deposit on a house, starting your new life in it and paying off a mortgage. This method is simply outdated.
Adopting the direction of past generations is a harder path to follow as a first home buyer, with affordability currently a large consideration, so Australians are now leveraging property differently to benefit their futures. Smart investors reside in a Sydney rental property in areas they want to live and buy Sydney property in places they can afford and rent out.
The ‘Buy and Rent’ model was first conceived of by PIA (The Property Investors Alliance) in 2005 for Australians who want to leverage investment property for future financial goals, allowing buyers to maintain their current urban-city lifestyle, without sacrificing their financial goals. More than half of PIA’s clients say that their personal motivation for investing in property is to attain financial freedom. Buying a home to live in will not deliver financial freedom or additional income.
Saving a 10% deposit, plus the typical 5% costs of purchasing a million dollar property in their preferred location (in addition to the cost of lifestyle), first home buyers would be left waiting years until they can finally get their foot in the door of securing a property.
This is where the ‘Buy and Rent’ model (sometimes known as rentvesting) can provide a better solution – allowing investors to enter the property market sooner rather than later. Purchasing in a more affordable area – at half the cost – and renting out the property to pay it off, while continuing to live in a Sydney rental property in a great location, means making no changes to your current living situation, seems a much more affordable and practical path to financial gain and success.
According to a 2017 white paper from Ipsos, the rentvestor is becoming increasingly popular as 61% of ‘Generation Y’ are jumping on the trend, 41% of whom are single, and 81% who are choosing to live and rent in inner-city areas.
Two million Australians are property investors, but they’re not just investing in a property, they’re investing in a financial plan. The number of landlords in Australia is about 8% of the population, utilizing property to grow their wealth, while tenants pay down their debt.
Based on historical market performance, we have seen big profits from those buying Sydney residential assets.
Following the ‘great Australian dream’ model of working, buying and paying off a home, first home buyers now include Australians in their 30’s and 40’s. So we’re flipping it around and investing before purchasing a first home. It may, at first glance, seem a backward way of entering the Sydney property market, but it’s fast becoming the smartest and most appropriate way to take advantage of the current economic climate….and own a property.
*Information from this article was sourced from The Property Investors Alliance