At least a third of investors in 2016 are first-time buyers who had not yet bought their own home, said a recent Mortgage Choice survey. Dubbed as “rentvestors,” these first-time buyers are opting to let go of the Great Australian Dream in order to own some investment properties first.

According to Mortgage Choice chief executive John Flavell, many first-time buyers “have come to the realization that they may not be able to afford to buy their first home in their dream location,” so they choose to do something that offers a better financial opportunity.

In fact, Google Trends shows that the term ‘rentvesting’ started to gain traction in May 2015. Since then, online searches have more than tripled, leading LJ Hooker to identify it as “the most common new buying habit” in its white paper published last year titled, “The (new) Australian Dream.”

This could also explain the results of official statistics showing low first home buyer activity in NSW, Victoria, and Queensland.

“(Rentvestors) purchasing investment properties wouldn’t be documented as a first home buyer in the data, which could be skewing the figures,” Flavell said.

But in spite of this trend, many of these rentvestors are intending to turn their investments into their homes at a later date.

“Tax benefits, including depreciation and negative gearing, can help facilitate young investors paying down the loan for the first two or three years,” said Jeremy Iannuzzelli, a tax adviser from Keshab Chartered Accountants and VJR & Associates.

But while this could fast track an investor into becoming an upgrader, Iannuzzelli warns that this strategy could “attract substantial capital gains tax” even if it is converted into one’s main residence.

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