Latest NewsBuy to 'rent Out' for a Dream ResultFriday, 12 May 2017

House prices are high but have you considered buying to let rather than buying to live?

Are you, your children or your grandchildren despairing at being priced out of the property market? With more figures out last week showing housing affordability in Melbourne and Sydney is at record lows, you're not alone.

The latest confirmation that the dream of home ownership is slipping further from reach comes from Monash University.

Apparently, not even new suburbs on city fringes are now accessible to first-home buyers, with only three in 10 lots within the reach of those on an average income. In Sydney, the figure is just 11 per cent, while in Melbourne it's 26 per cent.

This follows a Demographia International Housing Affordability Survey that showed Sydney is 81st of 82 cities in its affordability rankings and Melbourne is 79th.

This one was based on house prices as a multiple of household income (as opposed to loan repayments, which is another methodology) and a Sydney purchase requires nearly 10 times income, while Melbourne requires nine times.

But as I wrote here recently, the fact we are at the limit of affordability means the future direction of property prices will be directly determined by rate moves - which, though probably not for a few months now, most economists believe will still be up.

For those who don't already own a house, that will be welcome news. What's more, a soft market means increased bargaining power.

To ensure first-home buyers don't get themselves in over their heads - as many have in recent years, thanks to the carrots of the boosted first-home owner grant and the dramatic fall in interest rates during the credit crack up - they could also consider a different approach: renting and investing.

It might not be the property dream you had in mind but there are significant advantages.

Because you can rent many properties for less than it would cost to repay a mortgage on them, by renting you can bank a saving.

You could then use this saving to supplement the rent you receive from an investment property to meet the mortgage payment.

Here's the beauty of it: the government will also chip in. Your loss is netted off your assessable income at tax time, which means you get a tax break equal to your marginal tax rate.

You need to have the cash flow in the first place but you can keep this requirement to a minimum by buying in a cheaper outlying or regional area - one where perhaps you wouldn't want to live but others do.

This point is key because the whole strategy hinges on that reliable rental income. But with many people priced out of the market at the moment, the rental market is tight so the yield on investment properties is growing.

Your success as a landlord will come down to the quality of your investment (as will your eventual capital gain, which is the goal when you are dipping into your own pocket each month - in other words, negatively geared).

What you look for when you buy an investment property is entirely different than when you buy a home. While location is always paramount, an investment property needs to be functional in design and neutral in decoration. This decision needs to be made with your head and not your heart.

The time could soon be right. RP Data figures show capital-city house prices are moving sideways, rising just 0.8 per cent in the year to February, due to natural disasters and rate hikes. As RP Data's Cameron Kusher puts it: ''Conditions are certainly in the favour of prospective investors … [with] increasing scope to negotiate on price.''

And in the medium term, the fact there are about 20,000 too few houses being built in Australia each year to meet demand should support property values. Should you buy to let rather than buy to live?