What on earth is a rentvestor?

Are you looking at getting into property investment? Traditionally, this is viewed as the domain of the powerful, filled with those who are building empires and already own a thousand and one properties across Auckland.

However, using your first home as an investment is actually an increasing trend, and there's been a lot of press about this new breed of 'rentvestor' in the last few years.

So what's it all about?

Defining the rentvestor

The Reserve Bank of New Zealand has kept the cash rate pretty low recently, and interest rates on home loans have remained relatively stable as a consequence.

When you couple this with rising house prices, you find that people are keen to take out a home loan but unable to afford property in their desired area. So, they purchase an investment property as a first home, rent it out, and then lease a home themselves in the suburb they want to be in.

It's a little more convoluted than your classic 'buy the house in the suburbs with the red door and live there forever with 2.5 kids' scenario, but there are some great benefits to it.

What do you get out of it?

Firstly, you get rental income. While interest.co.nz and the Real Estate Institute of New Zealand's (REINZ) monthly report has noted that rental yields are below 4 per cent in many areas of Auckland, this is still another source of income to offset mortgage payments and rent on the home you live in. 

That's where your investment strategy needs to be safe and sound. As a rentvestor, you might have more freedom to purchase investment property in an area with strong yields, no matter how far away it is from where you want to live.

That's why sometimes securing an investment home loan for a property out of the city might be a good idea. For example, the REINZ report indicates that even though yields in Hamilton have decreased, they still sit at a very healthy 6 per cent. In Wellington, yields range from anywhere between 5 per cent and well above 6 per cent, depending on which suburb you buy in.

Of course, the tradeoff with high yields is often that capital gains aren't as forthcoming - but that's a whole other article really. Whether you're a first home buyer looking to settle into a new home or are looking to dip your toes into property investment, make sure you get the right mortgage advice. 

 

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