The current market is challenging for traditional property investment approaches. We have passed through the price cycle to a point where buyers must apply more scrutiny to their strategy. The days of simply “getting in and waiting for the fast gains” are over… for now at least.
This will scare many participants thinking about investing, but it also delivers a window of opportunity.
I’ve looked at the market landscape and all metrics suggest to me that livevestors are the ones poised to profit most.
What is livevesting?
Livevesting is a strategy I identified a couple of years ago that works well for young, first-time buyers.
Livevesting encourages the purchaser to build and live in a first property that, based on data, will suit their portfolio as a long-term investment. Then, after a period, instead of selling this home to upgrade, the owner retains it to kick off their investment portfolio.
It’s about choosing your purchase based on the numbers, not emotion.
So rather than, say, buying a rundown $600,000 second-hand unit in the ‘cool’ part of town, the livevestor seeks a new-build home in a suburb with the right metrics for tenant demand and value growth.
These new properties normally attract excellent government subsidies and financial support, helping reduce their buy-in costs. You design the home to suit the dominant resident type – say, family renters and owners – so it will appeal to tenants once you vacate in the future.
The livevestor then moves into the home to fulfil all requirements under any subsidy scheme. This also establishes a cost base for CGT in the future. The livevestor might even choose to sublet rooms to help service the debt.
As the property increases in value, the livevestor’s equity rises. This is their launchpad to moving on to the next home while retaining this original property as the start of an investment portfolio.
Livevesting works well because it maximises financial support while reducing taxes. Also, the home’s great investment fundamentals help build wealth sooner.
Why now is a prime livevesting period
The rental crisis has been tough on many prospective tenants, but it has created ideal conditions for livevestor to benefit.
There are multiple locations within commutable distance of major population centres that are in rental stress. Vacancy rates below 1.5 per cent (many below one per cent) are a sign that demand from tenants is vastly outstripping the supply of available properties. This has resulted in extraordinary rent increases in many centres.
A recent report in the Courier Mail based on PropTrack data revealed that in half of Queensland suburbs it is cheaper to buy a home and make mortgage payments than renting a property.
That opens up a swath of suburbs worth investigating for their livevesting potential.
In addition, the young buyer acquires a home, thus avoiding rental competition in this tough market.
Choosing the asset
Of course, to make livevesting work it’s crucial you select the right suburb and property as your starter home.
You must choose a location that stacks up on the important metrics. Things such as there being a dominant percentage of owner-occupiers over renters in the suburb. There should also be a good density of population within proximity to ensure demand for housing keeps the market active.
Other metrics include studying things like the most prominent occupations of residents as well as the level of education and even car ownership. By researching these demographics, you can determine the upward mobility of buyers and the growing demand potential of the suburb.
When it comes to choosing the asset, it’s a matter of thinking about its eventual use as a rental.
You’ll want to select a house-and-land package, as this delivers a range of investment benefits. A new home can be designed to appeal to a dominant resident type – like a family or professional couple. You will also want to pick a builder with a track record of delivering a quality home. This reduces the need for ongoing maintenance and repair while keeping your rent return to a maximum. Tenants will pay a little more for a beautiful home with good quality fit-out.
Of course, you’ll want to avoid overcapitalisation, but don’t be frightened of spending a little extra on quality where it will boost returns over the long term
The best way to make livevesting worthwhile for you is with the guidance of an experienced property professional. A QPIA-qualified advisor can help you establish a livevesting strategy based on your goals and resources. They will assist in selecting a location and property that can deliver the most benefit to you now, and over the long term.
Livevesting is an accessible and lucrative way for young buyers to break into the world of real estate, and there’s never been a better time for them to act than now.
Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy, never be SOLD an investment, know your numbers!
Visit www.aspirenetwork.com.au or call our office to be connected with an accredited and independent Property Investment Advisor on 1300 710 933