It’s no secret that property values across Australia have raced north in recent years, in both major cities and regional towns. So much so that median house prices in Sydney and Melbourne are currently sitting at the eye-watering figures of $1,177,769 and $852,724 respectively, according to the latest QBE Australian Housing Outlook.

If you don’t already have a foot on the property ladder, affording a decent place to call home, let alone your dream dwelling can seem an increasingly unattainable.

A growing number of first-time buyers are opting to get in the game by a strategy known as ‘rentvesting’. This recently coined term refers to the practice of renting a home in the area where you want to live – or, for some young Australians, staying put in the parental home – and buying an investment property in another, cheaper area.

rentvesting

Ipsos research commissioned by Westpac earlier this year showed rentvesting is on the rise, with 41 per cent of those surveyed stating it was better to buy a cheaper investment property elsewhere, and rent in their city or suburb of choice.

In addition to allowing you to enjoy living in a house or locale that’s beyond your present purchasing power, there’s a possibility your investment property will increase in value in the medium to long term. As an investor and landlord, you may also enjoy a number of financial benefits that aren’t available to owner-occupier buyers. Your own rental outlay may also be significantly less than you’d have had to spend buying a comparable dwelling. If you’re financially disciplined, the difference can be saved towards your own home or next property purchase.

Rentvesting can be a means of enjoying the lifestyle you want while simultaneously building a property portfolio, according to Finder.com.au money expert Bessie Hassan. ‘You don’t have to give up on, or defer, your goal of home ownership – a rentvesting strategy can allow you to break into the property market sooner and build future wealth,’ Hassan says.

Take your time researching the market and crunching the numbers to ensure it makes sense for you financially, she advises. ‘There are plenty of online renting versus buying calculators that can help you to gauge the costs involved, if you’re deciding whether to rentvest or buy a property as a principal place of residence,’ says Hassan.

‘To rent, you’ll need to consider the cost of your bond, rental payments and moving costs, if the place you’ve chosen proves more temporary than you expected. When you’re buying, there are all the usual outlays – stamp duty, loan application fees, mortgage repayments, insurance and taxes. It can also help to get some input from a reputable mortgage broker. It pays to do your homework before you jump in,’ Hassan says.