To rent or buy? A new breed of home buyers are answering that old question by doing both.
For Sam Perversi-Brooks the realisation came after almost two years of fruitlessly searching for the right first property to buy. The 29-year-old architect and his partner Atika Fraval, a communications executive, rent in Fitzroy Street, St Kilda, a virtual ground zero for inner-city living.
For $400 a week they live above Baker D. Chirico, have the George Hotel 50 metres away and can take their pick of restaurants within walking distance. But the more they searched for a house to buy, the more likely it became they would lose their preferred lifestyle.
''It became apparent that a lot of people with a whole lot more knowledge than us recommend renting where you want to live and look at purchasing in places that are affordable,'' says Mr Perversi-Brooks, who, along with his partner, is now looking to buy a pair of investment properties in Tasmania while continuing to rent in St Kilda.
They are not alone. Increasingly, due to issues of affordability and heightened concerns about lifestyle and long-term commitments, Generation Y investors now entering the property market as they establish careers and begin to think about future housing needs are bucking the traditional approach.
Instead of just searching for a family home in the suburbs - looking outwards from the CBD until their budget meets the prevailing price - they are finding different ways of becoming real estate owners.
Last year a survey of aspiring Generation Y (roughly those born between 1980 and 1992) property buyers by mortgage broker Mortgage Choice found that 43 per cent intended to make their first purchase an investment property. Renting in one place, or even living at home with patient parents, while buying somewhere else is now a commonly held plan.
For 32-year-old visual arts graduate Naomi Flynn and her architect husband, Alastair, the journey began in 2008, when they were renting in inner-western Yarraville and looking to buy in the area on a budget of $350,000.
. . . . .
Gen Y landlord boom
As head of Property Investor Services at Hocking Stuart Brunswick, Christopher Snell has had an influx of Generation Y investors starting out as landlords.
His clients include newly qualified doctors to tradespeople who have been in the workforce since their teenage years, and along the way Mr Snell has identified some of the young buyers' defining characteristics. ''A Gen Y landlord is reasonably relaxed.
They're certainly open-minded about the tenants who might take up residence in their property,'' said Mr Snell.
''The Gen Y investor is quite aware of that bottom line and they're certainly more trusting than Generation X; they're more likely to take professional advice.''
In Brunswick a property investor can secure a recently built two-bedroom apartment for between $480,000 and $600,000, which can in turn rent out for $450-$520 a week in a market where vacancy rates are generally below 1.5 per cent. Mr Snell counsels neophyte property investors on what they are legally required to do.
I remember the discussions I had in the late 1980s about exactly the same topic. The financial advice smart people were giving was the same - rent where you want to live and buy a PI somewhere you could afford.
So the financial equation hasn't changed, but it would be interesting to know if people were doing the smart thing as often then as now. I suspect not.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Brilliant article. Great to see our media trying to inspire my generation. I'll forward to all my friends. I love Melbourne because it's a city of free thinking (good party town too).
Brilliant article. Great to see our media trying to inspire my generation. I'll forward to all my friends. I love Melbourne because it's a city of free thinking (good party town too).
Yeah future you're going to have to ease up, crowbaring in that you are young or gen y into every post! Haha
There are quite a few guys in their early 20's on this site, but no one seems to have this attitude that you have, and it kind of looks bad on all of us, you acting so greedily
The strategy would make sense if prices weren't falling.
Although I'm the first to say that prices aren't falling everywhere, I'd also say that now is not the time to be chasing big capital gains in short timeframes.
If I were young and starting again I would put lots of time and effort into getting a very good education and learning to get into a high paying profession. Then, when things turn around (and eventually they will), I'd be in the box seat to take advantage of the opportunities that will present themselves.
Buying an investment property could be seen as an insurance policy against rising prices in a strong market. In a weak market you are not only losing with your interest repayments, you are also looking at capital losses. That result could be something that could set back a young person for years financially.
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