In the evolving markets of property investment, many individuals are turning to a savvy strategy known as rentvesting in order to get a foothold on the property ladder.
Rentvesting allows Australians to live in their desired location while still building their property portfolios by buying property in a location where they can afford. This approach is popular because it offers flexibility as well as a pathway to home ownership.
However, there comes a time when rentvestors may want to make the big leap from property investor to proud homeowner. To go from rentvestor to homeowner requires some carefully planned steps and the ability to leverage from your investment equity.
For buyers planning that transition, working with a residential buyers agent can help clarify when to hold, sell, refinance, or move from investing into buying a home to live in.
What Is Rentvesting?
Rentvesting is an increasingly popular strategy to achieve your goals in real estate. Essentially, you purchase investment properties in areas where property prices are more manageable and where you can afford to buy, whilst you live and rent in the neighbourhoods where you want to live.
This allows rentvestors to benefit from potential capital growth and rental income without sacrificing lifestyle, which is typically a more expensive and upmarket suburb that has all the amenities you desire.
The core objective of rentvesting is not just to secure a financial investment but to align long-term goals, which will often include home ownership for many.
If your ultimate goal remains to own a home, then understanding how to bridge the gap from rentvesting to home ownership is crucial.
How Can Rentvestors Transition From Investor to Homeowner?
Before making any decisions, it’s important to take a step back and evaluate your financial and lifestyle goals.
Ask yourself the following:
- What does home ownership mean to you?
- Are your investment properties contributing positively to your long-term financial goals?
- Do you have sufficient savings or equity to take the next step towards home ownership?
Understanding the timing of this transition is vital. The Australian property markets are volatile, and the market conditions can affect your decision to sell or hold onto your investment properties.
A home buyers agent Sydney can help rentvestors assess whether it is the right time to move from investing into buying a home, especially where lifestyle, borrowing capacity, equity, and market timing all need to be balanced.
What Is the Difference Between an Owner-Occupier Property and an Investment Property?
When transitioning from owning investment properties to purchasing a home to live in, it is important to recognise the differences in what you will prioritise in these two types of properties.
What Should You Prioritise in an Investment Property?
When purchasing investment properties, the focus is often on the potential for capital growth and rental yield.
Key considerations may include:
- Location: Areas with high rental demand and affordability alongside the potential to earn profit on capital growth.
- Property condition: Investment properties may need some renovation to create equity and enhance rental value.
- Market trends: Performing due diligence and researching demographics and future developments in the area that could increase property value.
- Investor gains: Focus on profitability, cashflow, yields, and long-term goals.
What Should You Prioritise in an Owner-Occupier Property?
In contrast, when buying a home to live in, personal preferences play a more significant role:
- Lifestyle preferences: Proximity to work, schools, amenities, and lifestyle factors become more critical.
- Property features: Personal taste in design, layout, and outdoor space takes precedence.
- Emotional investment: The property should feel like home and cater to your family’s needs. Personal preferences come into play.
Understanding these differences can help shape your purchasing strategy moving forward.
A first time home buyer agent can help buyers separate investment logic from owner-occupier priorities, especially when the next property needs to suit both lifestyle and long-term financial goals.
How Can You Extract Equity From Investment Properties?
One of the primary methods to fund your transition into home ownership is by leveraging the equity built up in your investment properties.
Here’s how to do it.
How Do You Determine Your Equity?
Equity is the difference between the market value of your property and the amount you owe on your mortgage.
To determine your equity:
- Get a property valuation: Contact a professional appraiser to understand your property’s current market value.
- Calculate outstanding debt: Check your mortgage statements to know the remaining loan balance.
- Calculate your equity: Subtract your outstanding debt from the property’s market value.
How Can You Access Your Equity?
Once you’ve established your equity, you can either tap into it through refinancing your loan or consider a home equity loan.
Refinancing
This allows you to replace your existing mortgage with a new one that has a higher limit, and you can take the difference in cash to use towards your home purchase.
Keep in mind, you will not be able to access 100% of the equity in the property. Typically, it is more like 80% of the equity is “accessible”.
Home Equity Loan
This is a second mortgage on your property, where you can borrow against your existing equity, usually at a lower interest rate.
When Should You Sell an Investment Property to Buy a Home?
In some cases, it may be more beneficial to sell an investment property rather than leverage its equity.
The decision to sell should be carefully considered based on:
- Market conditions: If your investment property has gained considerable value, selling it at the right time can free up significant capital.
- Investment performance: If your property is not generating the desired rental income or the market outlook is negative, selling may be a wiser choice.
- Financial goals: If your ultimate goal is home ownership and liquidating an investment property will enable you to purchase without financial strain, then it could be the right time to let it go.
Why Should Rentvestors Remember the Purpose of Their Investment?
It might feel difficult to let go of some of your property portfolio that you have built up over time, and worked hard to grow.
However, all investments will have a purpose and if your goal is to get to home ownership, you need to remind yourself that this is the reason you have invested in the first place. Property is the vehicle that has helped you get there.
So, don’t be fearful to offload and sell some of your investments in order to achieve your goals.
Working with a residential buyers agent can help rentvestors make clearer decisions about whether to refinance, sell, or hold investment properties while moving towards home ownership.
Disclaimer:
Aus Property Professionals Pty Ltd retains the copyright in relation to all the information contained on its website and in this guide. This guide, and any content provided in addition, or linked to resources, is general information only and not investment advice. As everyone’s individual situation is different, we advise individuals to always seek advice from relevant professionals such as legal, financial, accounting, and investing experts.
The intention of this guide is to be used for general information purposes only, in addition to your personal research and due diligence. We do not take any responsibility for any actions taken as a result of this guide as any actions should always be taken with consultation with relevant professionals who take individual circumstances to account.
Past performance doesn’t guarantee future results.
We have compiled the information contained in this guide from online resources, our research, and consultations, and we cannot guarantee the complete accuracy of this information, and we will always reference the resources where the data and information was derived.
