As house prices skyrocket to eye-watering heights around the country, many young Aussies are wondering if they are ever going to get on the property ladder.

The news on housing right now is rather grim. Sydney house values surged by $50,000 in just one month and the Melbourne market could be headed towards a median home value of $1 million by Christmas.

Overall, house prices are tipped to soar by a massive 17 per cent this year across our capital cities – marking the fastest pace of growth since the late 1980s.

It’s a pain that many first homebuyers are feeling. There’s the couple with more than $135,000 who can’t buy in Sydney’s “worst” suburb and another family who have $100,000 but are “totally priced out” of the market. A Gold Coast’s family with $40,000 wondered whether starting a business was a better investment than finding a forever home.

So what if you have money saved but it’s looking like you’re going to be renting for the next 30 years?

Here’s some ways to make your money grow even if you’re renting.

Share portfolio and a side business

Young people shouldn’t feel disheartened by property prices right now, according to finance expert Natasha Janssens, but she does recommend ditching the savings account, apart from keeping an emergency fund.

“If you want to be accumulating wealth, you want your money to grow faster than the rate of inflation. Putting money in a savings account is not going to do the job from a growth point of view and certainly at the moment you are not making any money on savings,” she said. “You also have to declare and pay tax on top of it, so keeping it in savings is costing money.”

One of the key goals of financial independence is to create a passive income so we are less reliant on having to work in order to enjoy life, recommends Ms Janssens, who is founder of the website Women with Cents.

“While paying down a mortgage can be one way to reduce our living expenses, we can also do this by building up a passive income – for example a share portfolio that brings in thousands of dollars a year in dividends or creating our own business,” she said.

The great news for young people is that it has never been easier to do this, added Ms Janssens.

“Technology has evolved so much in recent years that starting an investment portfolio now is really straightforward, and micro-investing apps mean you can get started with as little as $5, instead of $5000 as was once the case,” she said.

Plus the gig economy also offers ample opportunity for growing your income and starting a side business.

Don’t forget to invest in yourself either, whether its paying for further education to lift your earning potential or busting out on your own via self-employment, she said.

Become a rent-vestor

Buying your own home is often seen as part of the Australian dream, but especially in Sydney and Melbourne it can seem like an increasingly unaffordable prospect, said money coach Max Phelps. But you can get a foot on the property ladder – you just don’t need to live in it.

Mr Phelps is a professional rent-vestor, who chooses to rent the home he and his wife, Kelly, live in and invest in more affordable areas with better rental returns than their home.

For example, in the inner suburbs of Sydney at the moment, one-bedroom apartments start at around $500,000 and might rent for around $350 a week. With a two-bedroom, it costs $700,000 to $800,000, with rents of $450 to $500 a week. Once we look at a three-bedroom house, or terrace, prices more than double to $1.5 million-plus, yet renting the same properties is around $700 to $900 a week, he said.

The couple rent a three-bedroom, waterfront apartment in Drummoyne, for $950 a week, yet it would be around $2.5 million to buy and has strata, rates and other costs of around $400 a week attached, he said.

“By contrast, just two of our properties in Queensland rent for $1250 a week, yet cost us less than $1.1 million to buy. The first one of these was bought with an $80,000 deposit and the second one used equity from the first, plus another $20,000 in savings,” he said.

The couple now has 15 properties they collect money from but are still renters.

His tips for successful rent-vesting include locking in a two-year lease when you rent.

“Agents hate these, because they cut out their annual releasing fees, but long-term landlords love them. If the agent says no, ask them to put in writing why not,” he advised. “The only legitimate reason is because the owner is thinking of selling, or moving back in next year. Nobody wants to get kicked out of a place they’ve gotten used to.”

Mr Phelps also suggested renters negotiate minor improvements on moving in like painting and installing blinds and flooring that you can do on behalf of the landlord if they pay for materials.

“If you’re signing for two years, you’re more likely to get this. Long-term landlords love this because it’s free labour for them, but it makes all the difference to how a home feels. If the landlord refuses reasonable requests, it’s better to find out before you sign, than six months later when something breaks and they won’t repair it,” he said.

But make sure you use those savings to buy property while you’re renting.

“The biggest problem with renting is paying more and more rent every year and you want this to be offset by collecting more and more rent every year,” Mr Phelps said.

It’s best to get advice from a good mortgage broker, accountant and buyer’s agent to help you work out the complexities of investment property financing, taxation, trusts and buying in different areas with better returns, he added.

“Don’t get sucked into get-rich quick schemes to buy new properties on the outskirts of major cities. Developers pay big commissions to sell their latest projects to out-of-town investors who don’t realise that Ipswich isn’t the same as Brisbane or Camden isn’t Sydney,” he said.

Ditch the renting shame

People need to lose the shame around renting, declares money educator and expert Vanessa Stoykov, as people in some countries around the world take out leases for over a decade.

“If you can rent and a have a great life then it’s better than people buying properties and it’s not their ideal property, so they are living in places that they don’t like and then work their way up the property ladder, but have to wait 10 years to upgrade,” she said. “By investing in things outside of property you can grow your money.”

Diversifying into a small business can be a gamechanger, she said. She started her own company at 26 with $14,000 and now its turnover is in the millions.

Use the favourable 15 per cent tax rate and stash away more into your superannuation, she also recommends.

Educate yourself on the share market by subscribing to relevant newsletters and read up on the topic, she advised.

SOURCE: https://www.news.com.au/finance/money/wealth/how-to-invest-your-money-if-you-cant-afford-to-buy-a-house-in-australia/news-story/2df606651b29191868446511503664a7