Bianca Chatfield is pondering the pros and cons of rentvesting.
Buy, buy, buy seems to be the fashionable trend in property right now.
And if you have been looking, like me, you would have seen the masses arriving at open for
inspections — socially distanced, of course — looking not too dissimilar to the Boxing Day sales. It seems many want to secure the property right there, with supposably secretive conversations with agents that take place for all to hear.
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I get deflated when I like a property, even if it’s just within my price range, as I’m finding the competition is fierce. I’m not one to back down from a challenge, but my competitive streak can’t win me an auction without cash to back it up.
So I have found myself questioning: what benefits could there be in buying an investment property instead and renting in the area I want to live? This is known as rentvesting, and it’s become a popular trend.
Having grown up on the Mornington Peninsula, and given what you can get for your money down there, I’m tempted to invest there. I could find tenants to help with my mortgage repayments and continue to rent in inner Melbourne, where maybe I could negotiate a cheaper lease. The tax deductions on an investment are quite enticing as well.
But that plan becomes less exciting when I look at stats showing the treacherous state of the rental market — especially in inner-city Melbourne and Sydney.
The shocking reality is COVID-19 has meant job losses, financial hardship and a huge amount of uncertainty for some people, with renters hit particularly hard. This led to nearly 60,000 Victorians lodging rent reduction agreements with Consumer Affairs Victoria.
Former netball champion and The Block contestant Bianca Chatfield is looking to buy a property in the Middle Park area and her partner Mark Scrivens will live with her and pay rent. Picture: Tony Gough
The latest SQM Research figures reveal there were 27,070 vacant rental properties in Melbourne at the end of October, more than double the 11,882 available at the same time last year. In Sydney, 26,455 rental properties sat vacant. These are quite alarming numbers.
Commentators say a mass exodus of young renters, who were forced to move home with parents or seek cheaper accommodation due to employment loss, had partially caused the glut. The closure of borders to migrants and international students further shrunk inner-city tenant pools.
Keyhole Property Investors managing director Melissa Opie said a lack of demand for short-term rentals had also contributed to the unpleasant surge.
“Bayside properties and CBD investments that were listed as Airbnb-type rentals, which were heavily affected once borders closed, joined the long-term rental lists to try and secure tenants,” Melissa said.
Many renters have come to expect more bang for their buck as well. I have friends who are renegotiating leases or moving house to secure cheaper accommodation, and making the most of the fact some investors are being forced to accept significantly lower rents to get people in their properties.
There are good opportunities for renters in the city and inner suburbs at the moment.
But Nelson Alexander partner Mark Verrocchio is optimistic the tide is turning — despite his agency’s vacancy rate sitting at about 5 per cent, quite a hike from the normal 1 per cent.
“There is now more certainty around employment and if conditions continue to improve, the
demand for inner-city leasing will return,” he told me.
While this sounds positive, I don’t think rentvesting is for me — at least not in the inner city at the moment, as relying on tenants to stay in the time of COVID-19 seems a little risky.
I wouldn’t rule out rentvesting down on the peninsula. But ideally, I want to be able to live in the property I buy so I can put my renovation skills to good use.
After discussing my situation with Melissa, she was adamant “buying smart, … if you’re in a position to do so”, was my best move right now.
“The market isn’t slowing down,” she said. “If you’re in a position to buy, you should get in quickly”
A typical Melbourne house is spending just 33 days on the market before selling — an 11-year low, according to the Real Estate Institute of Victoria.
With a whole lot of competition out there, I need to get moving, and fast!
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