The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1421 CANT BUY PERFECT , BUY SMART RENT VESTING - RENT or OWN WHERE YOU LIVE?
Stop waiting for the perfect property and start building wealth now through rentvesting - the strategy that's changing how Australians enter the property market.
Rentvesting turns traditional property ownership on its head. While your parents might have laughed at the idea of paying someone else's mortgage instead of your own, today's financial landscape makes this approach surprisingly powerful. By purchasing an investment property (anything to get into the market) while renting where you actually want to live, you can start building equity years before you might afford your dream home.
We break down exactly why this makes mathematical sense: a $500,000 studio apartment growing at 10% annually generates $50,000 in equity compared to saving just $5,000 extra per year while waiting. The numbers become even more compelling with today's interest rates - a $3 million home in Freshwater could cost $6,000 weekly in mortgage payments but rent for just $2,000! As tenants, you also avoid maintenance headaches, council rates, strata fees and repair costs.
For first home buyers, we dispel myths about grant requirements and explain the multiple financial assistance programs available, including using your super for deposits and avoiding Lenders Mortgage Insurance with smaller deposits. Stop letting perfect be the enemy of progress - the property market waits for no one, and the sooner you're in, the faster you'll build wealth. Ready to explore if rentvesting could work for you? Calculate what you can buy today, compare potential rental income to mortgage costs, and witness how this strategy could accelerate your property journey.
Here I've got the perfect heading for you. Stop waiting for perfect. Start rentvesting now. Enter the market now. Live your dream through rentvesting. Buy anything, rent your dream. Get started with rentvesting. Own something. Rent where you live that's rentvesting. Own something, rent where you live that's rentvesting. Can't buy. Buy smart. Start with rentvesting. You get it, guys. That's what we're going to talk about today.
Speaker 2:Stay tuned. I'm the ringleader, so let's go. Good morning everyone. Welcome to Morning Minutes Myself, michael Bergio, mark Novak, episode 420, 1421, talking about rent vesting the I like this topic because this is definitely a newer era topic.
Speaker 2:If you said to your parents, your grandparents, you're not going to own and pay the mortgage of the house you live in, you're going to be paying someone else's, they would laugh at you and say, don't be silly, no, we're not paying that. But that's not the same of the last few years. In particular, there's a phrase for it and when something's got a phrase like rent vesting, then it's catching on. But let's start with mark. What is rent vesting and why is it becoming more and more popular?
Speaker 1:you remain as a tenant and you buy something, anything to get into the property market, and then you put a tenant into that property, so you're the landlord for that property.
Speaker 2:So you've got into the market all right, let's start with there must be financial benefits to do this. But before we go into financial benefits, what are some benefits of being a tenant where you live, compared to being the owner where you live?
Speaker 1:Oh, it's fantastic. Maintenance is one of them probably the biggest one, I'd say where you don't have the outgoings, you don't have the strata rates, the water rates, any of that stuff.
Speaker 2:Um, and you know, if the maintenance of anything goes wrong, you can just pick up the eight, pick up the cool, um, call the agent, get fixed yeah, the stove breaks huge and especially if what you typically see is red vesting, you're renting a higher premium home than what you may own, so the maintenance could be a lot higher. So to save that cost, because someone might say, well, you've got to do it on your own, but you're typically renting a property at a higher level than what you own. So there's that reason. But there must be a financial consideration and incentive why this is a lot more popular.
Speaker 1:Well, I think the biggest thing, the biggest problem that I see with, with people um, not considering this is they abstain, they wait and they wait and they wait until they can buy the perfect property. And it's like property values are going up and up and up and if it's costing you more to buy that property, you're just losing money. So if you get in sooner into anything, so if you get into a studio apartment, if you get into a one-bedroom apartment and you really want to buy a three-bedroom house, that's cool.
Speaker 2:But just get into that one-bedroom or studio and don't wait yeah, and I here, I think here are the numbers and I remember with my apartment. So you're looking at the mortgage worked out, let's say mortgage charter council everything worked out to be about 1400 a week, but it was only leasing for 550 per week. So that's an example where to buy that property. But then I could go well, what could I rent for 1400 a week? And that can take you to basically a beachside property. So you can see, especially with interest rates now back up to that, five, six, seven percent, this is a lot more impactful.
Speaker 2:A few years ago, when people were getting 1.9 1.8 percent uh loans, there wasn't as big of as a a distribution between the rental market and the land tax market and I think you hit on something perfect which a lot of people look past If they can't buy what they want, as you said, they save. But just because you don't want that type of property doesn't mean it doesn't still have property growth. If you look at let's take DY, for example let's say units have gone up 10%. That's all units studios, one bedrooms, two bedrooms.
Speaker 1:People find it hard to believe.
Speaker 2:I know. So you may want to buy a two bedroom home. But let's say you've got the ability to buy a $500,000 property and you've got 50 grand savings. Now you may be able to save 10% additional. So 50 grand a year, that's an extra $5,000 a year. But if you can buy a $500,000 studio apartment, that goes up 10% a year, you're now saving, earning an extra $50,000 a year. And what's going to get you to that two bedroom faster, saving five grand cash or getting 50 grand equity Capital growth?
Speaker 1:Yep, spot on, spot on. And it's pretty hard for people to fathom that. They're like nah, mate, I would never buy a one-bedroom unit or I'd never buy a studio. But the cold hard facts are, if you get in guys as a rent fester and I speak with mature age people 50s, 60s, 40s, smart and they're going you know what? Yeah, no, I'm not going to do it. I'm like, hang on a sec, you've got to do the maths. Even if they're helping their kids, I'm saying your kid's not going to pay 30 grand in stamp duty. So I know you want your kid to live in a two-bedroom unit. That's $950,000 or $1 million in DY. But get them into something sub-8 and just get them to rent it out. And then that dream later you can always sell that asset later that you've rent-vested, so you can have it for five years and then sell it and buy exactly what you want, because there's your savings plus the capital growth you had in five years, rather than just your savings over five years. Rent vesting, rent vesting, rent vesting. It is good.
Speaker 2:Yeah, and I think I forgot the other part. I was going to say but yeah, that virtually covers it and I think, even if you've got a no, this is what it was a lot of people are. When you're trying to do your first homeowners, you've got to live in it for six months now.
Speaker 2:You've got to do yes, yes so let's say, and only out of 10 purchases, only 10 percent are first homeowners, so our first time buyers, if that so of you this is going to apply to. But for the people who are your first time buyers, where you've got to live in it for six months, then your goal is to own property for five, 10, 20, 30 years. What's six months? If you have to live in it, or if you just sacrifice and pay the stamp duty because you're buying something for 500 grand let's say stamp duty is 12 grand Are you going to get more than 12 grand in rental income that could compensate for it?
Speaker 1:so well, you know, I'll see some people even just leave it vacant, but you know, shouldn't do that, um.
Speaker 1:But uh, the six month thing also is a little bit of a myth because it's a reasonable, it's showing a clear intention. Um, you know, a reasonable uh effort, um, to live in the property. It's within a 12-month period. So, yes, you can actually first don't buy, I can actually buy that rent vest and not have to go into it for 12 months. They can leave a tenant in there for 12 months, the first 12 months when they do go in that period you're talking about, if they are funny, if they move in and after a month they are financially unfit, there's a change with work or something they can move, they can move out. But they had a clear intention. So, you know, I know people always say first time buyers are going to be in there for six months. It's actually not a figure. If you research it with the government, it's showing reasonable effort and that's deemed as, yeah, sure, six months is probably reasonable. But you know, if you're in there for one month, two months, three months, and you just can't afford it and there's a change, that's fine.
Speaker 2:Yeah, and I think where this rent vesting could be very, very helpful is for families needing who may have that two-bedroom apartment and they need that house. And it's a big step on property purchase wise and mortgage wise, where you may have 10 years ago bought a two-bedroom unit for, say, 600 grand. It's worth 1.5 now, but the house you need is 3 million, like we were talking about the other day, just like knocked down in Freshwater was like $3 million.
Speaker 1:So to be fine. I can't believe that. I can't believe that if you want a little house in Freshwater, I think we worked out what the mortgage would be and it was just scary to have an entry-level house in a suburb like that. I even looked at the Marrickville I looked at. I saw something sold in marrickville for 3.1 million a little cottage, and I'm thinking like that's, that's a hell of a lot of money at six percent interest rates yeah, like, and that's it, that's probably just paying interest, so let's go four million it was four million.
Speaker 2:Let's do it eight percent principal interest. Eight percent, that's 320 000 a year you're paying. So that's divided by 52 is six thousand dollars a week now to rent that house. You're talking two grand a week. If that, yeah, if that, if that, so you can get.
Speaker 1:So that's a big one that's a good one. So buy a you know one, two, three bedroom unit. Rent it out. Go and rent your house in marrickville. Rent your house in marrickville and live there. Least you've put your foot in the door for the property market. That's our message today look at this.
Speaker 2:So 2600 a week fresh water a monster, yeah she's a mansion, there's your floor plan what street's that? That is 91 harvard road wow but six grand a week there you go well, that's right, be on the water.
Speaker 1:Third, eight hundred dollars for a six grand mortgage so you know, the message today is just get, just get in there, guys, just get in there. Rent vesting is a is a big thing at the moment. We're seeing a lot of people do at the moment um, and and still, even if you're in that first time by category, you can actually still get your grant. You're no stamp duty paid whilst living in that property for 1300 um, whatever rent vested, rent vested and talk to your real estate agent about um, or do some really good research on, or talk to your real estate agent about the grants, because there's some serious grants out there for first home buyers that include you can use your super as a first home buyer to buy your first home. People don't know. There's um. There's you, you can save tax to save a deposit. Then use your super as a first home buyer to buy your first home.
Speaker 1:People don't know there's um. There's you, you can save tax to save a deposit. Then use your super as a first home buyer. There's no stamp duty under 30 grand. There's um. There's other save. There's saving uh ones where for two and a half percent you can actually, or five percent you can buy a property deposit and you don't have to pay LMI.
Speaker 2:There's about five different grants for first-time buyers, not just one and just quickly, things to consider for rent vesting is what can you buy today? So go, you need to go to a broker, what can you buy today? And then look at the repayments on that principal and interest repayments and then go see what you can rent for that and then, just to show you how better off you are the property that you can rent for the equivalent of your mortgage go see what that mortgage is and what that is worth.
Speaker 1:If you go get those four figures, you'll have a good idea if this is right for you I'm a dog with a bone with with helping people get finance as well, so if you think you can't do it and you can't get into the market, call me. Call Birch, call me.
Speaker 2:Beautiful, thank you.
Speaker 1:Thanks, Mr Birch. See you Bye.