Growing up as a Gen Y, I have always been taught by my parents to buy a house in the suburbs, start a family and pay off the family home over 30 years in order to retire. But is this the right way going forward? Or is our generation the start of a brand new way of thinking; of rentvesting?
So what is Rentvesting and is it for you? Rentvesting is a term for those people that choose to rent where they want to live and invest in other areas that will provide them with the best return on their money. When it comes to renting many associate it with a poor family trying to save for a house. But what if this has all changed and renting the massive home is your end goal. This is the new reality for many Gen Ys.
So why would you rentvest? As the world is beginning to change and the younger generation continue to move around it has you questioning if buying a family home is the right move. With all the costs associated with buying and selling it is hard to continually move to where the jobs are. As the younger generation change jobs every couple of years it is not plausible to buy a family home while trying to establish a career. Many employers and big companies are expecting their employees to work longer hours and travel in order for them to climb the ranks. Now what we see is a lot of young professional’s choosing to rent near the capital cities for work and invest in the suburbs where they can get a better return on their money.
So is this a better way of doing things? Well, that depends on your circumstances. If you choose to rent in an area where the rent is 2-4% that is typically close to capital cities and or more expensive houses then this could be of benefit to you. Now let’s say you went and bought investment properties that returned 5 to 7% and had a tax benefit to reduce your own tax then you would see yourself far better off. Remember when you’re renting, you’re not paying all those extra bills like rates, insurances, and repairs or upgrades that come along with owning the family home. So when it comes to renting it checks out mathematically, but many of us still don’t want to be seen as renting the million-dollar house. They like the comfort of knowing that it is their house and they get to do whatever they want with it. But if you’re the sort of person that likes change and doesn’t mind moving around then you have to ask yourself, is this the right strategy for me?