Saving for a deposit for your first home requires discipline and can be hard work, and many younger buyers have decided to leave their home city to build a life in regional Australia.
It’s a big move but understandable when interest rate rises push prices beyond budget. It’s smart to rethink your strategy so you can retain your goal of climbing onto the property ladder.
There are two common paths you can take. You can head for a regional centre to find employment, make new friends and finally own your own home. It’s a drastic play, but many do it and never look back.
The alternative is to become a “rentvestor”, where you purchase the home you can afford and rent where you want to live.
It’s an excellent approach for young couples and families who are not ready to quit the bright lights yet remain laser-focused on owning real estate.
Below are some tips to help you consider a rentvesting strategy.
Think long-term
Capital gain from property takes time, so make sure it matches your other personal and financial goals.
Choosing a regional centre
The best capital gain comes from areas on the up-and-up. Spend time seeking the best potential regional centres where you believe prices will rise fastest.
Property choice
Your purchase must be attractive to tenants. The property will crush your cash flow if it’s vacant. Ask local real estate agents for advice on the types of homes popular with renters.
Local services
Ensure your property offers proximity to shops, schools and other amenities. Local transport is not the best in many areas.
Financial benefits
A good accountant will also maximise the tax benefits of being a landlord.
Cash shortfall
The rent may not cover the entirety of the mortgage. Make sure you can make good any shortfall.
Loan
Lenders tend to charge a higher interest rate on an investment loan.
Management fee
Many clients use a property manager to look after their property and pay 8-10% of the rent in fees. They’ll help set the rent, negotiate with potential tenants and handle maintenance.
Upkeep costs
If you buy an apartment, predetermined strata fees apply and should be in your budget calculation. With a house, maintenance costs can be higher.