‘Rentvesting’ the new way to become a property mogul

Owning property is the great Australian dream, but is renting really ‘dead money’? | LISTEN

Some property analysts question the idea that rent is ‘dead’ money. Picture: Phil Williams

The great Australian dream of home ownership is leading buyers to make poor financial decisions, according to two prominent investor­s who advocate “rent-vesting” and want to see more regulation of real estate agents.

In the third episode of podcast On The Fence, property investor Margaret Lomas said she “didn’t believe” signs the property market was starting to heat up in Sydney and Melbourne, as auction clearance rates and house prices rise. “There are far fewer listings and there are slightly more buyers than there were about six months ago still operating on those fewer listings,” she said.

She suggested buyers look to Brisbane and Adelaide for better investments. Anyone who had bought in Sydney­ in the past 18 months wouldn’t see capital gains “for at least five years or longer”, she added.

Fellow panellist and sharemarket investor Steven Johnson said renting where you wanted to live and buying to invest elsewhere was a better strategy to accum­ulate wealth in the long term.

Margaret Lomas is chair of Property Investment Professionals of Australia. Picture: Sam Mooy

The chief investment officer at Forager Funds Management, Mr Johnson said the idea that “rent money was dead money” was “crazy”. “Whether it’s your capital that’s tied up in your home or whether you’re paying rent to someone else, it costs you to live in a house,” he said.

Ms Lomas, who has accumul­ated 38 properties since the late 1990s and written eight books on property investment, said emotion was the biggest hind­rance to wealth accumulation.

“I think one of the biggest problems we have in Australia is that we are still labouring under the mis­apprehension that we need to own our own home in order to be considered getting ahead,” she said. “People buy property because they feel comfortable with it. This is the biggest problem: most people­ think they know how to pick a good property, they think buying something that they would live in or they love the look of is all they need to do — that can’t be any further from the truth.”

Mr Johnson said the boost to house prices from lower interest rates was losing its impact. “I think the ability for that to translate through to higher and higher prices­ for assets is largely over and people need to be very, very consciou­s about that,” he said.

Ms Lomas said the property sector “absolutely” should be reg­u­l­ated. “But it seems too big a job for politicians to suddenly regulate a property industry that has around 330,000 stakeholders,” she said.

Mr Johnson said: “Honestly, in our industry (equity investment) you’d be in jail if you were saying the things that are going on (in the property industry). It’s quite dangerous and scary.”