The stereotypical image of landlords – grey-haired owners of massive property portfolios – is fast changing.
A new group of rental home owners is here; the first-home buying investor.
According to ME Bank’s Household Financial Comfort Report for the six months to December 2013, 15.3% of young singles were saving for an investment property and 24.7% of young singles intended to buy a home to owner occupy. Gen Y first-home buyers A new group of rental home owners is here; the first-home buying investor.
Demographer and KPMG partner Bernard Salt says it is common for Gen Y first home buyers to be tenants themselves or live at home.
Read more: First home buyers – what to look for
He dubs these alternative homeowners the ‘rentvestors’, squeezed out of Australia’s metro housing markets by rising prices and fierce competition, but finding non-traditional pathways to that all-important first property.
‘There are signs first-home buyer activity is growing … they are just having to think creatively,’ Mr Salt says. These are the ‘rentvestors’, finding non-traditional pathways to that all-important first property. First-home investors on the rise
Nick Burke, director at Property 4 Profit, agrees the trend ‘may well be on the rise’ as Australians won’t give up their love of owning property.
‘It’s hard wired into our DNA,’ says the property investment educator, commentator and investor advocate.
‘This strategy enables FHB/landlords to consider owning property out of town, for instance shrewd Gen-Yers who come from Sydney may despair at their prospects of being able to afford to live in a decent house in a nice part of their own hometown, but those same people may find a good quality investment property in Brisbane is well within their reach.
‘They can see a strong future for themselves as an investor compared to a less appealing and less attainable pipedream as an owner occupier.’ This strategy enables FHB/landlords to consider owning property out of town.
When Tracey and Tony Jeffrey were ready to start buying real estate they bought three blocks of land in the high-growth suburb of Cranbourne, in Melbourne’s southeast, instead of buying their own home.
‘We didn’t really want to buy a home to live in,’ Tracey Jeffrey says. ‘We were running a home-based business for a number of years that needed a home that we would never buy to live in without the business.’
Read more: How to be a financially-fit first home buyer
The idea of continuing to rent didn’t bother the couple, who like having the flexibility to move house with little drama whenever we like.
‘Plus renting was always going to be cheaper than owning – no rates or no maintenance.’
Perks of becoming a FHB landlord
- Gets you on the property ladder
- Lets you buy a property you can afford
- Keeps you free to live anywhere you want
- May need little or no weekly cash injection, depending on purchase costs and rental income
- Builds value – equity – you can use for that future dream home
Cons of becoming a FHB landlord
- Usually attracts capital gains tax on sale – ask your accountant for advice
- Weekly costs – mortgage, landlords insurance, body corporate fees, letting agent costs, repairs etc – can be hefty so make sure you can cover all expenses whenever the investment is vacant
- If tenants turn nasty, can be stressful – how will you cope?