RENTVESTING - is that really a thing?

Rentvesting is a term used to describe a property investment strategy where an individual buys an investment property in a more affordable or desirable location, while renting a home to live in themselves in a location where it may be too expensive to buy a property. This approach allows the rentvestor to potentially earn rental income from the investment property while also enjoying the lifestyle benefits of renting in a preferred area. Rentvesting has become a popular strategy for first-time homebuyers who may not be able to afford a property in their desired location or who prefer the flexibility of renting.

As a lot of New Zealanders, owning a home and having a property to call our own is something many of us strive for. It's considered the quintessential 'Kiwi dream'. Unfortunately, for many of us, this dream seems out of reach in the current housing market due to factors such as lower incomes, lack of sufficient savings or KiwiSaver. It can be challenging to get on the property ladder, no matter how you look at it.

When considering buying property, typically, there are three main options that we have available. The first option is to purchase a house that we can afford for now. The second option is to settle for a property below our standards, perhaps in another suburb or different from what we really want, because we can't afford to buy a house where we want to live. The third option, called 'rentvesting', involves purchasing an investment property when we can't afford to buy the home we want in our desired location. This investment property can then be rented out to cover the mortgage payments while we continue to rent elsewhere and save towards our dream home.

The location of the investment property is not crucial, and it can be somewhere affordable like Rangiriri, Huntly, or Te Kauwhata, rather than in expensive areas like Auckland, Tauranga, or even Queenstown. Rentvesting is a strategic move to get on the property market by generating a passive income from an investment property, making it much easier to purchase a second home in the future. Since this property is an investment and not intended to be our primary residence, we can choose a more affordable area to start with. However, it's important to consider the investment's ability to generate a profit when selecting the property.

Rentvesting is a viable option for anyone who dreams of getting on the property ladder but hasn't yet achieved it. Whether you're a younger couple or family looking for an ideal home to raise your children and build a life, planning to invest in your retirement plan, or simply longing for the dream home you've always wanted, rentvesting could be an option for you. This strategy is ideal for younger people who have been priced out of their desired location(s), single parents or new families who want to raise their children in a particular location but can't afford a home there, or families with older children looking to invest in their retirement or children's future plans.

Like any significant decision, rentvesting has its pros and cons. Although we're investing in a property that we're not planning to live in, it has long-term and short-term investments that will set us up for the lifestyle we want. The pros of rentvesting include enjoying the location and benefits of where we want to live, building wealth while waiting to purchase our dream home, and saving on major costs while renting. Additionally, tenants can help cover our mortgage payments with their rent payments, while we enjoy our current lifestyle. The cons of rentvesting can include making an emotional sacrifice, as well as the risks involved with investing in property. Ultimately, it's essential to consider all aspects of rentvesting and weigh the pros and cons to determine whether it's the right option for us.