Analysis: Is 2017 the year of the rentvestor in Sydney?

If I could choose a real estate buzzword of the moment it would be “rentvestor“. The term describes those who continue to rent in an inner-city location that is far out of reach to their budget. Instead, they choose to buy in an area that is within their financial means.

Rentvestors have been active for some time, driven by the astounding price gains of recent years, as well as the lifestyle preferences of many first-home buyers.

It has become the choice for many locked out of buying in an area where they want to live – a way. to gain equity in a property in the outer suburbs, regional areas and, for some, an entirely different state.

There are key strategies to lead you on the path to investment success. First, leave the emotional buying at home and bring the balance sheet. One of the biggest pitfalls of a rentvestor is to buy with your heart, not your head. Any investment property needs to be viewed from the perspective of a landlord and not an owner-occupier.

Financial suicide could ensue if due diligence and research is not done before buying. Understand the local rental market: what are tenants looking for? Is the area an attractive rental location? What are the transport connections and amenities? What is the yield potential and rental income? What is the demand and supply? An investment driven by true facts and figures should lead to a smart decision.

Be cautious if you choose to invest from afar. Other markets may offer an accessible lower entry price but it is important to factor in the distance. Travel needs to be considered with any interstate investment.

With a crackdown on travel-expense claims, which includes inspection, maintenance or the collection of rental income, any associated expenses need to be considered. A reliable property manager is also needed to ensure a headache-free investment.

Landlord insurance will help if an unexpected catastrophe occurs. The level of insurance will reflect the degree of coverage. Some cover the loss of rental income and tenant relocation if the home becomes inhabitable.

Read the policy thoroughly to understand the degree of cover. Opting for the cheapest policy may be better for the short-term budget but in the long term it may pay to be fully covered, particularly if investing interstate.

It is essential to remain realistic regarding upfront and ongoing costs so a buffer to include preparing the home for the rental market and any unexpected costs is desirable.

• Related: Where to find NSW homes under $650K
• Related: The house type rising to meet buyer demand
• Related: Australian dream ‘out of reach for 80 per cent’

Build a team of reliable go-to sources of trade, experts and advisers. This could include seasoned investors and a good property manager (ideally one that will go that extra mile).

It may be tempting to save dollars by having a bash at doing everything yourself but professionals are exactly that, an expert in their field, they know when to scrimp and save, and when it is best to pay top dollar.

Dr Nicola Powell is a data scientist at Domain Group. Tweet your questions to @DocNicolaPowell