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More and more tenants plan to become landlords by buying property in cheaper areas. Are you ready to think outside the square?

In the current housing market, it can be tricky to find an affordable property to buy. That’s why aspirational homebuyers are thinking outside the square and looking at ‘rentvesting’: buying an investment property in a more affordable area and renting it out, while continuing to rent the home they live in.

Of course, it takes a bit of work and strategic thinking, but ‘rentvesting’ can be a clever way to get a foot in the real estate door. Let’s take a good look at the important things to know.

It can be a more affordable solution...

  • For first-home buyers, affordability is a key factor. And that’s where rentvesting looks attractive. It allows buyers to live where they need to (for example, close to where they work) and invest somewhere closer to their budget.

    According to Adrienne Church, RESIMAC’s General Manager Mortgages NZ, this new trend is on the rise – especially among Auckland-based Millennials. “It’s about getting into the property market. People want to jump on the ladder, and this is one way to do it.”

… but be aware of what’s involved

  • With rentvesting, the idea is to be able to get onto the property ladder faster and start building equity. But it’s also important to understand what this option involves – and how different it is from a standard first-home purchase.

You can’t use KiwiSaver

  • The main difference is that you cannot use your KiwiSaver savings or a HomeStart Grant towards the deposit of your investment property.

    “If you buy an owner-occupied first-home, you may get a few more benefits. And without them, you might need to put a bigger effort into savings for a deposit,” says Church. “It depends on your situation. On paper, a three-bedroom standalone property in another town can be more affordable. But if you can use KiwiSaver and a Government grant, you might be better off buying an apartment or a townhouse in the city.”

Know the ongoing costs

  • As we said, owning property is a good way to generate wealth, but remember, owning an investment property also comes with a few ongoing costs. These include fixed costs and rates (Council rates, Insurance costs and sometimes body corporate fees), but also maintenance costs (renovations, painting, repairs, roofing…).

    Knowing those costs is key to finding a good investment property. “When looking for the right property to invest in, be fully aware of what those costs are, and understand what the rental market looks like,” says Church. “If you’re buying in a different town, will you need a property manager? How much it’s going to cost you? And what can you rent your property for?”

How we can help you

  • Is rentvesting an option you’re considering? We welcome you to contact us. Our team of Lending Specialists is here to help you make your home-ownership dream a reality. Plus, we work with expert mortgage advisers that can assist you every step of the way.

  • Use a calculator to get an estimate of how much you can borrow.
    Try one here

  • See if you qualify. To get a more accurate idea of how much you can borrow with RESIMAC Direct,
    click here

  • Call our Lending Specialists and they can do the calculation for you over the phone plus answer any questions you have at the time. Talk to us on 0800 466 656