Why Now Is The Best Time To Be A Rentvestor

Why Now Is The Best Time To Be A Rentvestor
Why Now Is The Best Time To Be A Rentvestor

Rent-vesting is not a new term in today’s property investment market. The trend has been increasingly popular especially for young professionals. For those who are not heard of rent-vesting, it means that you purchase an investment property while renting somewhere else to live. 

Property prices have continuously risen and it is becoming more difficult for first home buyers to find and purchase their ‘dream home’. If you try and google ‘first home buyer’s guide’, most of the info that you can find will have one common message: “You must speak with a financial institution to determine the amount that you can borrow”.
A very harsh and reality check indeed. It means that when you embark on your journey to hunt for your dream home, many of those factors in your wish list have to be compromised. That is the reason why now there are many first home buyers who are opting to buy investment properties while renting.

Being a rentvestor has many benefits. You can choose to live in any suburbs that you like without having to worry about the hefty price tag of the property. You can rent at a place close to your office, and imagine the extra things that you can do by avoiding the daily 2 hours of traffic congestion you have to face, let alone the stress of being stuck in traffic or chasing the train’s timetable. You can also have the possibility to send your kids to some of the best schools in the state by rent in the good schools catchment zone. Did you also know that you can enjoy tax benefits (negative gearing) when you own an investment property?

So now that you know there are so many benefits of being a rentvestor, I would like to let you know that in the current Covid-19 outbreak, it is the best time to be a rentvestor. 

Rents are at ridiculously cheap price

Due to the Covid-19 pandemic, many countries are currently in the lockdown restriction. There are currently no international travelers or even domestic business travelers, traveling in between. This has severely impacted the short term accommodation and Airbnb market. Most of the owners of these properties now opt for the long term rental market. There is currently an oversupply of stocks available for rent as the vacancy rate has increased substantially in the month of April.
Landlords are offering discounted rent to attract and secure a tenant. You can take advantage of the current market to negotiate cheap rent with a long term lease (18 - 24 months). 

ii)   Take advantage of off-the-plan (OTP) property investment

I would not be a strong advocate to purchase an established investment property now (unless you can get a very good offer from the seller). The current rental market is competitive and it is very hard to secure a new tenant with good asking rent. You might end up having to wait for some time before being able to secure a tenant. Therefore, it is wise to turn your attention to off the plan investment.
Off the plan, investment helps you to dodge the current storm of the competitive rental market. Remember that prior to the Covid-19 outbreak, we are witnessing one of the fastest market recoveries. The market fundamentals are still there, supply is dropping drastically in the coming years. 

iii)  You are in a position to negotiate an offer 

Developers and real estate agents are more willing to listen to offers in this current state of the market. With many economists and analysts foreseeing the property market price to remain volatile in the coming months, many investors are holding their nerve to wait for the episode to unfold. Therefore, developers and agents are willing to provide attractive incentives for people who are willing to take action now. 

iv)  There is no need to have a financial burden at this moment

If you purchase an owner-occupied property now, even if you are financially capable, borrowing at this point is not the best option. The road to our economic recovery will not be swift and easy. It is not like Thanos snapped the finger to decimate the world’s population by half, and another snap will bring everything back. The damage is here to stay. It is best to have a cash reserve at this time to ride through the difficult time should things become tricky for you in the coming months. If you buy an owner-occupied property now, your monthly mortgage repayment will be higher as compared to the cheap rental properties that you can find in the market.

Covid-19 outbreak is a black swan event that no one expected would come. Australia has done a good job in effectively containing the spread of virus and allows the ease of lockdown restriction. However when we look at many other countries in the world, it is still a mess. We do not foresee international travel will resume in the next 3-6 months and to a select few countries, maybe over a year. It is the best time to find a rental property at a discounted rate, while being able to take advantage of the incentives that developers are offering for the off the plan projects.

This article was written by Justin Chang, a freelance contributor at Urban.com.au

Justin Chang

Justin Chang

Justin Chang is a property investment strategist who provides investment education, guidance and support for new and experienced investors across Asia Pacific.

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