Young Aussies jump on new landlord trend

A young Aussie has revealed the “unrealistic” reason she became a landlord and why it is fast becoming a trend in Australia.

First-time home buyers who have been locked out of the property market where they live are buying houses in other states and becoming landlords instead.

A young lady, who is in her 20s, who we will call Karen, works full-time for a tech start-up and is one of those young Aussies who has gone interstate to get on the property ladder.

“Rentvesting’ is a homeowning strategy where you rent property right for your lifestyle while you own an investment property right for your budget,” she said.

Living in Sydney, Karen bought her first property in her home state of Adelaide and later a three-bedroom home in Rockhampton in Queensland.

Karen pays $900 a week in rent in Sydney, which she shares with her partner, while renting out her Rockhampton property for $520 a week.

She said when she started house hunting, she quickly realised that buying in Sydney was “challenging” and she couldn’t afford to own where she lives.

“If I were to buy my first home in the area where I wanted to live in Sydney and the timeline of it happening soon felt unrealistic,” she said.

“Even if I could afford the deposit, the repayments would be difficult to maintain with the high interest rates.”

Karen pivoted and decided to buy affordable investment properties in high-growth areas.

She saved more $70,000 to purchase one of her homes and immediately formed a long-term plan to pay off her investments.

Her ultimate plan is to hold onto the properties for a few years until their value grows enough for her to buy into Sydney.

New figures from home loan lenders show an 8.45 per cent increase in first-home buyers applying for investor home loans in 2024,

Compared to last year, there’s a clear trend that more first-time home buyers are entering the market as investors. Soaring housing costs have made immediately owning and living in their dream home increasingly difficult. Many are adopting a ‘landlord first’ approach, allowing them to leverage rental income as a springboard and ultimately helping them save for their ideal home down the line.

Karen said, while she’s still feeling confident in her plan, it hasn’t been without stress.

Before she bought both her homes, she researched the vacancy rates in the areas and bought in places where she had the best chance of tenancy, but even with that on her side, soaring interest rates have made it hard.

After 2.5 years, my first investment property had been doing well and was positively geared, with the property value increasing by over $100,000,” she said. However, due to the high interest rate, my properties are a little negatively geared now, meaning I’m not earning enough through my tenants to pay off the interest. I’m hoping that the interest rate will come down soon, but I’m managing okay as I’ve funnelled some of my disposable income into covering the mortgage. I am confident my investment will bring a good return in years to come,” she said.

She said one of the hardest aspects was being a landlord remote from her properties and having to rely on a property manager to “help secure great tenants and ensure the property is in good condition before purchasing it”.

While she has been able to break into the property market, she said it was something other young Aussies find “frustrating” to do.

“It’s an ongoing conversation that I have with my friends and family as I try to advise from my experience to help them better understand the market,” Karen said.

“Many young people think it’s impossible to buy a house and give up on the dream, but it is possible, although it might not be the conventional way of buying a first home.”

Here at PHA Financial Services, we have, over the years, assisted many young Australians into the property market using the “Rentvesting” strategy. It enables you to live the lifestyle that you want and get into the property market as well.

This information has been prepared by PHA Financial Services and does not take into account your objectives, financial situation or needs. Before acting on this information you should consider whether it is appropriate to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. The information provided was accurate at the time of publication and changes in circumstances after a document is published may impact on the accuracy of information. Some information may have been collated from various third parties and we make no assertion that the information was originally ours.