Three-quarters of millennials in Australia believe they will have enough money for retirement, while less than two-thirds of baby boomers do. The younger generation is clearly making smart financial moves, despite their reputed love for smashed avocado and the challenges of an unaffordable property market.
With that in mind, let’s take a closer look at the creative strategies millennials are using to get ahead through property investment. Could these strategies work for you?
Rentvesting
In cities like Sydney and Melbourne, where property prices are exceptionally high, accumulating a 20% deposit can be daunting. A 20% deposit on an average Sydney home can approach $200,000, making homeownership seem out of reach for many. To navigate this challenge, many Australians are turning to ‘rentvesting’—purchasing an investment property in a more affordable area while renting in their preferred location.
This strategy allows individuals to live in desirable areas without the financial burden of owning property there while simultaneously investing in regions with better affordability and growth potential. By rentvesting, millennials can enter the property market, generate rental income, and benefit from capital appreciation without taking on the full weight of a mortgage in high-priced markets (NAB, n.d.).
Property Syndicates and Fractional Investment
Millennials are also exploring property syndicates and fractional investment opportunities, allowing them to invest in real estate with relatively small amounts of capital. By contributing as little as $100, investors can acquire shares in managed property portfolios and receive distribution income. This approach provides exposure to the property market without the need for significant upfront investment or the responsibilities of direct property management (AustralianSuper, 2024).
Home and Invest
Another prevalent strategy involves purchasing a property with the intention of converting it into an investment asset upon upgrading to a new home. This allows millennials to enter the property market, build equity, and eventually leverage their initial property to finance a subsequent purchase. While this may require saving for a second deposit, it can be an effective method to accelerate wealth accumulation and achieve a comfortable retirement (Well Money, 2023).
These creative strategies demonstrate the adaptability of Australian millennials in addressing financial challenges and proactively planning for their futures. Whether you’re looking to enter the property market, grow your investment portfolio, or set yourself up for retirement, thinking outside the box could be the key to success.
References
AustralianSuper. (2024). Gen Z and Millennials take charge of their super. Retrieved from https://www.australiansuper.com/about-us/newsroom/2024/12/gen-z-and-millennials-take-charge-of-their-super
Well Money. (2023). Will Australian Millennials Ever Fully Retire? Retrieved from https://wellmoney.com.au/wellhub/the-retirement-challenge-will-australian-millennials-ever-fully-retire/
NAB. (n.d.). How rentvesting works – Investing in property. Retrieved from https://www.nab.com.au/personal/life-moments/home-property/invest-property/rentvesting
Suncorp Bank. (n.d.). What Is Rentvesting? Pros and Cons. Retrieved from https://www.suncorpbank.com.au/shine-blog/property-investing/what-is-rentvesting-and-is-it-right-for-you.html