Snug announces a new category of living called ‘homevesting’. We’re redesigning the housing system to better suit the emerging lifestyle, work and retirement trends of the next generation.
Even in this modern age where it seems accessibility and optionality abounds, across the country people worry about their housing.
Our mission is to create a place everyone calls home with ‘home leases’ and ‘collective investment’.
We call it ‘home vesting’ so you can live where you love and invest where it matters.
We’re creating the future of housing at Snug.com.
Renting, please explain?
In life, there are some things that that we know don’t work very well, yet we persevere and accept the status quo. Renting feels like that.
For many renters, their house is not their home. There are some reasons for this….
Anxiety of early eviction - In Australia, 6-12 month leases are the norm and 20% of renters churn in the first year. By year two, 40% of renters have moved house. It’s great for the advertising, moving and letting business but not great for the customers in the housing market: renters and investors (we described the tenure mis-matching problem in our earlier blog post, when announcing Snug Match).
Request repairs at your own risk - many renters fear that to request a repair will result in a rent increase or non renewal. It’s a bizarre existence, where a paying customer in the rental market receives second rate service levels are that are barely tolerable for many.
Rent increases that surprise - the lack of sophistication of the rental market results in rental reviews that are either ad hoc or unpalatable, in most cases causing churn, vacancy and letting costs. Often these costs negate the benefit of the rent increase for the investor.
Government intervention surrounding renting rights often misses the mark. They either set the bar too low (Australian model) or too high (European model), with little regard for the investors who supply the housing stock, or the fundamental problems associated with home ownership as a cornerstone of Australia’s retirement savings model (home ownership plus pension).
It’s little wonder that renting is a second rate option relative to home ownership.
A home, with ownership, bundled
Home ownership is emotional and financial. It’s complex.
It’s becoming a housing option that a privileged few can access. Those with dual income, steady relationships or the bank of mum and dad can afford a deposit. With tight credit and many years of house prices growing faster than savings, potential first home buyers are being locked out of the market.
The desire for a home, drives ownership
Emotionally, we’re conditioned to strive for home ownership because it represents achievement, our personal style (contemporary, urban, classic, luxury, boho etc), security of tenure (leave on your own terms) and connection to our communities (school catchments, neighbours and jobs).
Renting does not seem to provide the same level of emotional satisfaction.
Housing, an asset class?
In many countries, equity in a house is a primary store of wealth. Regular savings through mortgage principal payments, leveraged through large loans and tax concessions, mix together like a magic pudding, producing eye watering returns for some.
Some countries have seen cheap credit produce astronomical house price growth. In Australia, the whole economy is distorted towards housing speculation. Houses aren’t really productive, unlike large profitable companies on the stock exchange or small and medium-sized businesses that grow products, customers, revenue and returns to shareholders.
The are also fundamental problems with retirement savings being stored in a single house.
Privileged asset class - many can not get on to this wealth escalator or are forced to disembark due to divorce or life events.
Transaction costs are high - entering and exiting typically costs around 6% of the value of the property including selling costs and buyers stamp duty. Imagine doing this three times in your life as a young couple, growing family or downsizing retiree? That’s 18% of your after tax lifetime earnings paid transaction fees associated with house mobility. Consider that in the context of your work day. 2-3 hours of your day wasted because you want to live in a different house or area. In a world of labour mobility and gig-economy work, this fixed home model is unsustainable unless we compromise our work, living arrangements and leisure time.
Tax incentives promote risk - the Federal Government provides principal place of residence capital gains tax exemptions for homeowners when selling. This promotes concentration of risk in to one dwelling.
Home ownership bundles important emotional and financial aspects but forces a compromise on both.
We wouldn’t invest in just one company listed on the stock exchange to build retirement savings. Why do we do this with housing? The media is full of stories where homeowners have lost huge amounts or in some cases their entire savings due to events in or around their home. For example, a freeway expansion, a flood or uninsurable event or a major employer closing down in a small town, that significantly lowers the value of their home, their savings.
Concentrating investment in one dwelling is risky. Imagine if you could own a little bit of property everywhere you wanted.
Home ownership is not a strategic investment
Most people don’t live in the fast growing capital cities. Those that live in regional areas don’t benefit from the rapid price growth. Over a working lifetime, the compound returns of owners in Sydney vs Singleton have varied by 10 times so $100,000 has become $3 million in Sydney but just $300,000 in Singleton.
Rentvesting, half the story
Rentvesting is seen as stepping stone on the path to home ownership. Renters often buy where they can afford a deposit, leverage negative gearing then move in.
In comparison, rentvestors live where they want, build up housing equity and later buy in the place they wish to live.
Home leases and Collective Investment
With home leases and collective investment we can to solve these problems.
- Renters should have home owner like benefits, that increase over time.
- Property should form part of a balanced retirement savings portfolio.
Snug Home Leases
Imagine if you could enjoy increasingly ‘homeowner’ like benefits with longer lease commitments. We are creating ‘home leases’ that build better relationships between the resident and the investor.
The longer your lease commitment, the more flexibility and security you have around rent, options to extend lease terms, personalising your home with refurbishment, renovations or even rebuilding.
Snug Collective Investment
We believe ownership of property is important as part of a balanced retirement savings plan but, unlike traditional home ownership, it should start early, be strategic and diversified.
Just because your lifestyle moves doesn’t mean your money has to (at great cost).
Investing regularly in a collective fund is the future. Say goodbye to mortgage stress.
Wait, what, how is this possible?
Here’s how it works…
|Ella the digital nomad still wants freedom with savings in property||Ella is on the move. She works and travels regularly while contributing regularly to the Snug Collective Investment from just $25 per week. When she’s back in Australia, she rents with Snug for the term that suits and enjoys great new levels of service.|
|Jenny and James create a family and future options||This young family couldn’t afford to buy near a good school and their family. They sign a Snug 12 year lease, renovate the kitchen and bathroom to their family standard with owner approval. They settle in to the community like a local, watch their kids grow up without the worries of moving. They invest in the Snug Collective Fund to own around the area. They have the first option to purchase the home in which they live or move on as their family needs change while continuing their Snug Collective Investment.|
|Bob and Jane are going coastal but their investment stays put.||They own a property outright, in a growth area. They don’t want to sell just to move up the coast. They sign a 24 year lease with Snug by the beach, knock down the rental house and choose their Snug modular home subscription to place on the coastal block.|
|Joan is 80, she owns a large home, that she loves but has limited cash flow.||Joan decides to progressively equity in her home by selling down at 2% per year for 25 years and leaving the balance to her family. She enjoys liquidity without a reverse mortgage.|
Homevesting means you can live where you love and invest where it matters.
Secure a lease for the term that suits both the owner and renter. Both enjoy higher levels of service and flexibility yet lower costs. Invest regularly with a diversified strategic approach to property as part of a retirement plan.
Homevesting = Home Leases + Collective Investment
This is the future of housing. This is Snug.