A new investor demographic is fast replacing rentvestors as “Australia’s property market winners”, according to a property adviser network.
ASPIRE Property Advisor Network has flagged an increase in the phenomenon of “livevesting”, which sees home buyers who qualify for government subsidies select their initial property based on its long-term investment potential rather than its suitability as a home.
According to ASPIRE Property Advisor Network’s founder and managing director, Richard Crabb, “livevesting has resulted from an extraordinary confluence of factors which make it incredibly feasible under current circumstances to build a property portfolio from scratch”.
It’s a convergence of “once-in-a-generation events” that’s fuelling the rise, helped along by historically low interest rates.
Mr Crabb said “due to COVID, we have reached a hallmark level of financial assistance from both the federal and state governments, particularly for first-time buyers looking to purchase new homes”.
“This, combined with the exceptionally low interest rate environment, has resulted in the ability to acquire a new home with minimal deposit and a monthly loan repayment that’s well below rents in the same location,” he explained.
According to the managing director, “livevesting buyers look at their home as a long-term investment and are prepared to move out after they’ve completed a minimum of 12-month’s residence if opportunity presents”.
He’s argued that for anyone looking to successfully adopt livevesting, they “must have a long-term investment strategy and choose the right sort of asset from the get-go”.
And maximising returns from the strategy requires both the buyer and the property to meet certain criteria.
“Livevesting is most advantageous to first home buyers who build or purchase a new home,” Mr Crabb said.
“After one year, they can choose when to move out of the property and retain it as their first portfolio asset, drawing on its potential capital gains and rent to help purchase their next home.
“These buyers must set aside the idea of the ‘forever home’ and choose locations based on long-term value growth potential and renter demand, rather than being hung up on where they’d like to live or what their heart’s desires are.”
Mr Crabb said when livevesting, buyers must also be smart about their home’s level of fit-out, warning potential purchasers not to get sucked into “the display home trap of flashy additions and extras”.
“Instead, shoot for decent, low maintenance, good-quality fittings, fixtures and finishes, and avoid builder upgrades that will tip into overcapitalisation.”
Mr Crabb expects anyone jumping on the livevesting trend will also enjoy years of depreciation benefits in the future.
“Living in your investment first doesn’t disqualify you from claiming depreciation benefits in the future, and new homes are a great way to maximise this upside,” he said.