More first-home buyers investing in affordable areas and renting where they want to live
More first-home buyers are choosing to invest in affordable areas and rent where they want to live.
THE Australian dream of owning a home is still alive for young buyers but many are getting creative to get into the heated market.
A recent white paper study by LJ Hooker showed the most common trend has been ‘rentvesting’ — buying where affordable and renting where you want to live.
This was backed up by other recent data from Mortgage Choice, which found the proportion of first-home buyers who were investors had doubled in more than three years.
In 2011, less than 10 per cent of investors were first time buyers. Last year, 22 per cent of investors were first-time buyers. Of the investors who were born after 1980, 48.4 per cent were first-time buyers.
LJ Hooker research manager Mathew Tiller said affordability was the key factor influencing these decisions.
“Rentvestors are predominantly the first-home buyer who has come up against the affordability barrier. They want to keep the lifestyle they’re accustomed to in terms of living closer to the city and all the social amenities, but they can’t afford to buy in that location.
“In order to get their foot on the property ladder, they’re choosing to purchase a property in a different location where affordability isn’t so much an issue,” Mr Tiller said.
Buyer’s agent Ben Handler, of CohenHandler, said he noticed more first home buyers were strategically building property portfolios.
“Because the market is moving so aggressively, we’re seeing people buying properties for investment and they’re waiting as soon as three months, looking at the uplift of the property and using that money to buy again for another investment. This is while they’re renting in the places they want to be,” Mr Handler said.
Mr Handler advised buyers to look at areas that weren’t subject to too much volatility.
“What’s important is choosing areas which do have a strong appetite for key tenants, also close to transport or even areas that basically have got plans in the future for infrastructure,” he said.
Mr Handler’s suburb recommendations were Mount Druitt, St Marys, Penrith, Harris Park and Parramatta.
With prices continually rising, Mr Handler advised against making irrational decisions due to pressure.
“Have a mandate for what you’re looking for with some flexibility,” he said.
Mortgage Choice CEO John Flavell said with so many changes to lending policy, it was now a more complex market place for first home buyers looking to invest.
“To cut through the confusion, people should go and have a chat to a broker, whether they’re part-way in saving towards a new home or whether they’re just contemplating on saving for a new home,” Mr Flavell said.
“Understand how much you will need to save, what you might realistically be able to afford and what sort of debt you might be able to service.”
When Ricky Briggs realised he could not afford to buy a home in Sydney, he decided to invest elsewhere while continuing to rent a unit in Abbotsford.
”I did an extensive amount of research in the Sydney metropolitan area, which was where I wanted to live based on work. I found I wasn’t going to get into the market,” Mr Briggs said.
The 24-year-old decided to look into the area he grew up in - Lake Macquarie, Cooranbong and Morisset.
“I found they were on the major growth list for the suburbs in NSW for 2015. Upon seeing that, I basically looked further into investing in the area and found it to be a good idea,” Mr Briggs said.
Last August, he bought a vacant 675sq m block of land in a new development at Watagan Park, Lake Macquarie.
“I found I could build a duplex and still maintain the first-home buyer’s grant and get double return once the property is built,” Mr Briggs said. “I’m building a duplex on the block of land and I’m going to rent them out and keep them as a long-term investment.”
With the equity he gains from the property, he plans to buy a two or three-bedroom apartment in about two years.
Mr Briggs’ advice to aspiring rent-vestors is to do a lot of research.
“Find the areas that are on the government’s major growths list for NSW over the the 2015 to 2016 year,” he said. ““Don’t be afraid to invest in regional or rural townships,” he said.