People who want to buy a rental property or get into the real estate market for the first time are told to look at suburbs with low vacancy and supply rates.
Well Money’s new research shows that first-time home buyers would be better off buying high-growth investment homes in mostly rural areas instead of the suburbs of capital cities.
The report says that people who want to buy their first home and have between $500,000 and $800,000 to spend are finding it hard to do so in Sydney because rising interest rates make it harder for them to borrow money.
This is where the appeal of rentvesting comes in: a buyer can buy an investment property in a cheaper suburb and then rent a home where they want to live.
The report found 30 rentvesting markets where a house costs between $500,000 and $800,000 and has the potential to grow in value over time and bring in cash.
Three of the top 10 suburbs in the country that a first-time home buyer could afford with a budget of up to $600,000 were in NSW.
With a median house sale price of $562,500 and a 4.4% yield, the town of Karuah in Port Stephens and Mid-Coast was ranked as the most affordable in this category.
Bega, with a median sale price of $582,000 and a 3.7% yield, and Woodberry, with a median sale price of $550,000 and a 3.7% yield, were also in the $500,000 range.
Scott Spencer, the CEO of Well Money, said that these suburbs were good places to buy a home because their weekly rents and house prices were going up.
In the last five years, the median price of a home between $500,000 and $600,000 has gone up by at least 5% per year on average.
“People who want to buy their first home in a capital city and have between $500,000 and $800,000 to spend have a hard decision to make,” Mr. Spencer said.
As a buyer’s budget grows, so does the number of homes they can rentvest in.
A buyer in NSW with up to $800,000 to spend could buy a home in Medowie, Macquarie Hills, Maryland, Mount Hutton, or Blue Haven.
The most expensive suburb on the list is Macquarie Hills, which has a median sale price of $85,000 and a 4% yield.
Even though it’s unlikely that many new homes will be built in the suburbs in the next few years, Mr. Spencer advises buyers not to spend more than they can afford to borrow.