MAIN IMAGE: Marcél du Toit, CEO Leadhome; Craig Mott, Western Cape area manager Rawson Property Group
The world over it is almost impossible for young people to get a foothold in the property market. Rentvesting offers them an affordable way to own property while saving for their dream home.
Rentvesting happens when you buy a property as an investment while choosing to live and rent in another area.
In Australia, as in South Africa, it is expensive to buy property in the trendy upmarket property areas. Most young people can’t afford it yet this is the generation known to go for what they want and to find a way to get it. So, many of them are chosing to buy a property in a less expensive area that they then rent out to build up an investment while renting in the suburb where they want to live.
In Australia this creative way to gain access to the property market is becoming increasing popular under millennial homebuyers and it is also gaining traction locally says our property experts.
Craig Mott, Western Cape regional sales manager for the Rawson Property Group, says rentvesting is a trend that is also slowly entering the South African property market and is strongly dependent on what millennial individuals or couples can afford as well as their lifestyle choices
“We are seeing a trend of millennial individuals or couples that choose to stay on with their parents in either an outbuilding or separate room within the house. They live rent free and make small contributions towards that household while being able to afford buying and managing their property to rent out,” explains Mott.
He says only a small percentage of millennial singles or couples, who are financially stable, don’t have kids or any additional expenses, can afford to rent in areas that they love and own property.
Marcél du Toit, CEO of Leadhome, says the upside is that these young professionals are acknowledging the attractiveness of property investment, even if they cannot compromise on their living standards.
With a short-to-long term approach, millennials can arguably keep their investment for five years, save and then buy their dream property. Naturally, rentvesting does not come without its challenges warns Du Toit: “Millennials are encouraged to consider all aspects such as price, location, timeframes, their role as landlord and a budget for incidentals and unexpected costs.”
Young professionals prefer to rent in trendy urban areas with easy access to mixed-use spaces with excellent internet and cell phone connectivity
Rent: Mixed-use or live-work-play
Where do young professionals that can afford to rent like to live? Du Toit says millennials are opting to rent because it is typically less maintenance and offers a convenient lifestyle. “This automatically changes what we would sell and the structure of the property itself. You would need a property that has some kind of mixed-use spaces for optimal customer engagement. Think work, life and entertainment all on the same real estate,” he says.
Mott agrees and says that in Cape Town they see that young people choose to rent in trendy urban areas such as Century City and the Atlantic Seaboard, provided that everything they need is within walking distance, and has excellent cell phone and internet connectivity to enable them to work remotely.
“Some individuals may even consider shared rentals with friends in the areas mentioned above,” says Mott.
Mott says millennials are big on individuality and DIY. When buying property, they tend to look for good investment opportunities and would prefer moderate fixer-uppers that they can transform to reflect their own tastes and style with minimal repairs.
They rent out these properties for up to 5 or 6 years while enjoying a carefree life in the urban areas or for some rent free with their parents and when it’s time to settle down and slip into family or retirement mode they would then choose to permanently live in this property.
He lists the following as examples of some upcoming suburbs that millennials would potentially buy property in:
Muizenberg, Milnerton, Tableview, Blouberg, Westbeach. Up country – Durbanville and Paarl area.
“These areas still provide a mixed-use community where they can preferably walk to work, shops, restaurants, and the gym,” Mott ends.
“It is imperative that as property professionals we better understand these trends and demands, providing the right opportunities in both the buying and renting scenarios. Millennials like to live where they choose, while having an investment working for them and not feeling the emotional pressure to buy in a location and at a potentially unaffordable price,” concludes Du Toit.