Strategic Rentvesting: Below Market With Upside Potential

State: New South Wales

Property Type: 3-1-1

Investment Objective: Medium-Term Growth

Purchase Price: $770,000

Asking Price: $780,000

Rental Yield: 3.7%

Value-Add Potential: Yes

A client approached us, interested in pursuing a Rentvesting strategy to buy an investment property.

Rentvesting is an approach ideal for singles or couples who want to maintain their current lifestyle and rent in preferred suburbs they might not afford to buy in. The idea is to invest in a property elsewhere, benefit from capital growth, and then use the accrued equity to purchase their dream home in the future.

Considering the array of options our client had—including development, renovation, granny flat additions, high rental yield properties, and more—we meticulously analysed the outcomes of each scenario. Our objective was to provide clear insights into the risks and returns of each option. After careful consideration, we settled on a strategy: to identify a property with value-add potential in a consistently growing suburb.

To cater to the client's needs and objectives, we provided a list of suburbs that not only demonstrated promising capital growth but also aligned with their investment preferences. Investing, especially for first-timers, can be overwhelming, stressful, and fraught with decisions that might lead to future regrets.

Throughout this journey, we stood by our client, addressing all their queries and presenting unbiased, data-driven pros and cons for any suburbs they were interested in, as well as those we found promising. This approach was designed to foster trust and bolster their confidence, ensuring a smooth and efficient purchasing process.

Though the client had initially anticipated a 6-7 month search, our guidance led them to a suitable property in just under 1.5 months. This property was not only an excellent investment, ready for immediate rental, but also offered substantial potential for cosmetic renovations and the addition of a granny flat for extra rental income (STCA).

Based on the vendor's requirements and the selling strategy of the sellers' agent, a strategic offer was placed, positioning the client for success. An appealing 2.5-month settlement was negotiated, and the property was acquired for $770,000, which was $30,000 below the price analysis estimate.

In addition, to minimise renovation costs while maximising return on investment, we assisted the client in devising strategies to avoid certain improvement expenses.

Remarkably, during the 2.5-month settlement period, the suburb's median price increased, and similar properties were sold for between $810,000 and $820,000. This was a fantastic outcome for our client—they started with significant equity and have ample opportunity to enhance the property with minor cosmetic renovations.