Young landlord with two properties reveals ‘unrealistic’ truth

A Sydney woman says becoming somebody else’s landlord was the only way she could afford to crack into an increasingly expensive property market. More young Aussies are finding themselves locked out of the capital cities and are turning to cheaper areas to buy instead.

Karen Nguyen, who is in her 20s, says it “wouldn’t have been possible” to enter the property market unless she purchased an investment property outside the major capital cities.

With the average home price in Sydney now sitting at north of $1 million, Nguyen said it would have taken her years to save up a deposit for a property in her home city.

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“It was proving to be much more challenging if I were to buy my first home in the area where I wanted to live in Sydney and the timeline of it happening soon felt unrealistic,” she said.

“Even if I could afford the deposit, the repayments would be difficult to maintain with the high interest rates.”

Nguyen, who was born in Adelaide before relocating to Sydney as an adult, decided to ‘rentvest’ in Adelaide and bought an investment property with a 10 per cent deposit. The Director of Admissions at a tech startup then later bought another investment property in Rockhampton.

Do you have a home buying story to share? Contact tamika.seeto@yahooinc.com

‘Rentvesting’ is a home buying strategy where you purchase an investment property in an area you can afford, while continuing to rent in an area you want.

While continuing to live in Sydney with her partner and paying $900 a week in rent, Nguyen rents out the three-bedroom Rockhampton home for $520 a week.

“When the interest rates increased, my strategy pivoted to buying more affordable investment properties in high-growth areas and using the capital gains or equity accumulated across these properties over time to purchase my dream home,” she said.

More young Aussies rentvesting

New figures from digital home loan lender Tiimely Home found an 8.45 per cent increase in first-home buyers applying for investor home loans in 2024, up from 5.87 per cent in 2023.

Recent data from Commonwealth Bank similarly found Millennials were the most “active” property investors, accounting for nearly half of all the bank’s investment property purchases.

“Soaring housing costs have made immediately owning and living in their dream home increasingly difficult,” Tiimely Home head of retail Belinda Jackson said.

“Many are adopting a ‘landlord first’ approach allowing them to leverage rental income as a springboard, ultimately helping them save for their ideal home down the line.”

But there are risks

Buyer’s agent George Cherchian said rentvesting could allow you to get a foot onto the property ladder and see the benefits of long-term capital growth but there were risks to be aware of.

“You are very much at the mercy of a landlord who may decide to sell the place that you are renting, they may decide to increase the rent or review the rent,” Cherchian told Yahoo Finance.

“You’re also going to forego government grants because you’re not going to get that as an investor and there are tax considerations.”

Nguyen said buying an investment property was a “learning curve” and noted recent rate hikes had been challenging.

She shared her first investment property was positively geared for the first two and a half years and increased in value by more than $100,000.

However, high interest rates have meant her two properties were now “a little negatively geared”, meaning the rent she receives from tenants isn’t enough to cover her interest.

“Every investment comes with its risk and not all investments work out - so you have to enter the market as an investor with this mindset and be ready to face the challenges that come with it,” she said.

Nguyen said she is “excited” to see her investment properties grow over time and wants to be a “great landlord” for her tenants.

“I’m looking forward to building my portfolio over the next few years and creating good cash flow once interest rates come down, and hopefully be able to purchase my dream home in Sydney one day,” she said.

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