Rent In The City, Invest In The Suburbs — The Rise Of 'Rentvesting'

As home prices in major metropolitan areas continue to escalate, many people living in big cities are buying investment properties in smaller communities while renting in urban areas.

Known as "rentvesting," the trend allows people to become homeowners and build equity while continuing to live in America's major employment centers. 

"For younger residents of big cities where real estate is particularly pricey, buying an investment or vacation property in a nearby but much more affordable area can be a way to begin to build equity without sacrificing big-city living," said Danielle Hale, Realtor.com's chief economist.

Don't Miss:

• Elon Musk and Jeff Bezos are bullish on one city that could dethrone New York and become the new financial capital of the US. Investing in its booming real estate market has never been more accessible.
• Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." These high-yield real estate notes that pay 7.5% – 9% make earning passive income easier than ever.

Real estate technology company Mynd, which coined the term rentvesting, found in a 2022 study that 43% of millennials and Gen Z considered buying investment properties. Most thought it would be a smart financial move. Most of those surveyed — 72% — said they would invest in a property in a state other than where they live, largely because prices are cheaper.

A recent Realtor.com housing trends report found that a typical New York City metro area house required an annual income higher than $200,000, to buy.

"Home prices in Buffalo and Rochester are considerably lower," Hae said. "Purchasing a typical listing in these areas, which are less than six hours from the city, requires less than $100,000 in annual income."

Trending: Warren Buffett flipped his neighbor's $67,000 life savings into a $50 million fortune — How much is that worth today?

Rentvesting has a few advantages. A rental property brings in passive income and diversifies your portfolio. Plus, if you're renting out a home you purchased, someone else is paying the mortgage and maybe even covering part of your rent. 

"Right now, we are seeing a lot more people buying properties specifically for short-term rentals like Airbnbs," said Seamus Nally, CEO of TurboTenant, a company based in Fort Collins, Colorado.

Rentvesting also comes with challenges. You're paying for two residences, which can be challenging unless your property consistently generates a good profit. You also have to either hire a property manager or take responsibility yourself for screening tenants, collecting rent and making repairs.

Keep Reading:

• Become a real estate investor today — How to start small by mirroring BlackRock’s big move.
• Investing in real estate just got a whole lot simpler. This Jeff Bezos-backed startup will allow you to become a landlord in just 10 minutes, and you only need $100.