There are a growing number of savvy young investors in Australia who are starting to see the benefits of buying to rent, rather than buying to live.
Depending on where you live, this can be a far better financial move than buying your own home. For instance, let’s take the suburb of Eastlakes, adjacent to Mascot in Sydney’s inner city.
Here, a three-bedroom, one-bathroom terrace is on the market for around the $1 million mark. As well as needing a $200,000 deposit to secure this property, you’ll be paying a mortgage of around $900 per week.
You could rent the very same home for just $660 per week – and buy a property somewhere more affordable elsewhere as an investment.
Buy to rent, rent to live
Both millennials and Generation Y are moving in the direction of investing affordably while renting their own home – or better still, investing while living at home with their parents!
This is the case for Sophie Sicurella, aged 21, who already owns four properties.
Investing was “always something I was going to do” she says because “I was brought up by my parents to save and spend my money wisely”.
“For me it’s not about inspiration, it’s about necessity – I do not believe that I can retire comfortably on my super and the aged pension alone. From a young age it was just the norm in my family that you take matters into your own hands to prepare for your retirement.”
Another example of a young investor is Nathan Birch, who is perhaps at the extreme end of the scale: at the age of 31, he has a portfolio of over 200 properties worth $50 million, and a personal net worth of $30 million.
Through his company BInvested, he’s helping other young Australians develop an investment strategy that involves buying properties below market value, in areas with high growth potential and where owners can enjoy a strong cashflow.
Adopting the mindset to invest
Birch believes anything is possible for those who are willing to take on the attitude that wealth is theirs for the making.
“A lot of people incorrectly buy into the mentality that property is unaffordable, but you need to be willing to look outside of your own backyard to make it work,” he shares.
“There are still bargains to be had and if you’re willing to save for a deposit and have the right team around you, it’s not as difficult as it sounds.”
He adds that young Aussies don’t need to be high-income earners, have access to a huge inheritance or living with their parents in order to become a landlord.
“You do have to build a strong mindset around saving to invest, however,” Birch says.
“Our clients represent countless examples of young investors who have built impressive portfolios… and goals to be financially free by their early 30s.”
Perhaps this could be one of the solutions to the great housing affordability crisis.
Prime Minister Malcolm Turnbull had it wrong when he suggested parents buy their kids’ a home: instead, young Australians should be looking to buy someone else a place to live, thereby taking giant steps forward in their own financial security!