From the time of childhood, everyone dreams of the day that they own their own home. For a child, it’s about the idea of getting to have space where they are the boss. To an adult, it means a place to call your own and plant deep, lasting roots. Unfortunately, owning a home is a lot more expensive today than it was when homeownership was but a childhood fantasy to millennials.
Buying a home today means all but kissing your savings account goodbye. If only there were a way that you could make a house pay for itself so you could—well—get a free home! There is a way that you can get other people to pay a large portion of your mortgage called rentvesting. Continue reading to learn more.
What In the World Is Rentvesting?
Baby boomers built a booming western economy through sheer will, cunning, and bare-knuckle economic brawling. It must confound them to see the way that millennials have manipulated the economy to cope with stagnant wages and the rising cost of living. Now anybody with a car can be a taxi, anyone with a house can own a bed and breakfast spot, and anyone with a leash can be a dog walker. Maybe that’s always been the case, but millennials are realizing it and strongarming their way into the market.
So leave it up to millennials to come up with a way to become a real estate investor and get someone else to pay the mortgage and then give it a cool name—rentvesting. Right now, your face probably looks like it did that time when you were a kid, and you tasted your ear wax for the first time. What is ‘Rentvesting’, and who decides what words make it into the lexicon?
Rentvesting is when you buy a home to rent out, but you’re still renting your principle place of residence. While you pay rent to your landlord, you’ll have someone paying rent to you on your property. The rent they pay you will cover most of your mortgage, and all you have to do is keep paying your rent. You have to love those life-hacking millennials.
Where Did This Rentvesting Scheme Originate?
In reality, rentvesting isn’t so much a new idea as it is a spin on an old idea. For years, savvy investors who didn’t have the capital to buy an investment property outright used their principal place of residence as collateral. Using their home as a guarantee increased their borrowing capacity and enabled them to buy more property—property they’d rent out. Of course, they paid the rent off on the property by using the rental income.
Rentvesting is similar to what landlords have done with Australian property for years. Live in one place and pay for it out of pocket while owning a rental property that the renters are paying the mortgage. The only difference is that instead of owning a home and using it as collateral, nowadays, people are doing it without guarantee while they’re still renting from another landlord.
It still works for the benefit of the homebuyer because the rent they pay at their principal place of residence is lower than their mortgage. They have the living expenses of a tenant and the security of being a homeowner.
Is Rentvesting for You?
Only you will know whether or not you’re in a position to become a rentvestor or not. One thing to remember is that rentvesting is not a shortcut to homeownership. You still need to have a decent credit rating to get a home loan, and you also need to save up for a down payment.
Furthermore, you need to make sure that you’re on the same page as your landlord. As a tenant, you’re still subject to the landlord’s whims, and you may end up needing to live on the property you’re trying to rent out.
Whether or not rentvesting is for you, it’s an investment strategy that is worth giving some consideration. Who knows? Maybe you’ll be the first Aussie to go from rentvestor to real estate mogul.