Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Sunday, 12 February 2017

Rent-vesting?

The rise of the rent-vestor

I was quoted in this Domain piece yesterday which discusses "rent-vesting".

That is, renting where you live but also owning an investment property as a foothold on the property ladder. 

Historically it hasn't been all that common, but it's becoming less unusual in the capital cities, not least because of the generous tax benefits in Australia. 

In rising markets it's fairly typical these days to see young couples moving home and opting to retain a capital city apartment as an investment property. 


In an era where there is more casualisation in the workforce, and when people are changing jobs, careers and locations more rapidly than ever before, rent-vesting can make sense for some people (provided that they can comfortably service a mortgage debt, of course). 

The strategy allows people more flexibility in where they live and rent, potentially being able to afford to live in a superior or more convenient area (given that rental yields are typically lower than average in prime capital city locations) but adjusting to a cheaper location at relatively short notice if the household budget so requires. 

For people who move location or place of employment often, it is simply impractical to continue paying punitive stamp duties and other transaction costs each and every time they move. 

Every strategy has a downside, of course, and rent-vesting tenants can feel as though they have less security of tenure while being unable to make a place 'their own'.

Packing and unpacking can also be a crushingly dull task at the best of times.

I think we'll see more rent-vestors in the future than there are today, but it's more popular in rising markets than deteriorating markets.

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Auctions get up and running

Never mind the record high temperatures in Sydney at the weekend, the preliminary auction clearance rate rose as high as an exceptionally strong 84.8 per cent (CoreLogic), while Domain had the figure at 84.2 per cent.

A blazing start to the auction year, then.

This was the first weekend from which there was a reasonable sample of auctions to draw data. The median auction price in Sydney was $1,200,000, which was 15 per cent higher than on the corresponding weekend of last year when the median price under the hammer was $1,041,500.

There will, however, be far bigger tests ahead as auction listings ramp up from here.


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