Thinking of buying your first property but not ready to settle down in one location? Rentvesting might just be the perfect strategy for you.
Rentvesting allows you to invest in property while renting elsewhere — helping you build wealth without sacrificing your lifestyle. This guide explores what rentvesting is, why it’s so popular, the benefits and risks, and who it’s best suited for.
What Is Rentvesting?
Rentvesting is a property strategy where you rent a home to live in while owning an investment property elsewhere. It’s particularly attractive to first-time buyers priced out of their dream suburbs or professionals seeking flexibility without missing out on capital growth.
Instead of buying a home to live in, rentvestors choose to invest in locations that offer better value and rental yield, while renting in areas that suit their lifestyle.
Why Is Rentvesting So Popular?
Rentvesting continues to rise in popularity due to the ongoing challenges of housing affordability, especially in capital cities like Sydney and Melbourne. It provides a way to:
- Enter the market sooner
- Start building equity
- Maintain lifestyle preferences
- Leverage tax advantages available to property investors
Rather than wait years to save a larger deposit for your dream home, rentvesting helps you gain a foothold in the market and start growing wealth earlier.
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The Advantages of Rentvesting
1. Rent Is Often Cheaper Than a Mortgage
In many urban areas, renting can be more affordable than making mortgage repayments. This can free up more of your income to put towards investing or other financial goals.
2. Tenants Help Cover Your Mortgage
As a landlord, rental income from tenants helps cover your mortgage repayments. This creates a valuable income stream while your asset (the property) appreciates in value.
3. Tax Benefits
Investors can claim deductions on expenses like:
- Loan interest repayments
- Property management fees
- Repairs and maintenance
- Council rates
- Landlord insurance
- Depreciation
Negative gearing can also reduce your taxable income if your rental expenses exceed your rental income.
4. Maintain Lifestyle Flexibility
Rentvesting lets you live where you want while owning where you can afford. This flexibility is ideal for people not ready to commit to one location due to career changes, travel, or personal circumstances.
5. Build Equity for Future Purchases
If your investment property grows in value, so does your equity. This equity can be used to fund the purchase of your future dream home or more investment properties.
Check out “Crunching the Numbers: Positive Cash Flow vs. Negative Gearing“
The Drawbacks of Rentvesting
1. You May Miss Out on First Home Buyer Grants
Owner-occupiers often have access to government grants and stamp duty concessions. Rentvestors may miss out, especially if the property isn’t their primary residence.
2. Rental Costs and Landlord Responsibilities
As both a tenant and a landlord, you may face double the obligations. Ongoing maintenance, tenant issues, and property management can be time-consuming and costly.
3. Capital Gains Tax (CGT)
When you sell your investment property, CGT will apply to the profit made. However, properties held for more than 12 months are eligible for a 50% CGT discount.
4. Residential Tenancy Restrictions
Renting a home means less control over your living space. You’ll need to follow tenancy laws, tolerate inspections, and may face rent increases or the need to relocate.
5. Property Market Risks
Property values can fluctuate. Not all areas deliver the same level of capital growth. If you choose the wrong location, your investment may underperform.
Who Should Consider Rentvesting?
Rentvesting is ideal for:
- Young professionals wanting lifestyle flexibility
- Buyers priced out of inner-city or high-demand areas
- Empty nesters who want to downsize and create passive income
- Anyone who wants to start investing without sacrificing quality of life
It’s especially useful for those not ready to commit to a permanent location or who want to build wealth through smart investment strategies.
Things to Consider Before Rentvesting
- Do your research.
Buy in high-growth suburbs with strong rental demand, infrastructure, and access to schools, shops, and public transport. - Think like a landlord.
Choose properties with broad tenant appeal and low ongoing maintenance. - Ignore personal preferences.
The best investment property isn’t always the one you would live in. Focus on rental yield and capital growth potential. - Crunch the numbers.
Make sure the rent can cover most, if not all, of your mortgage and expenses. Break-even or positively geared properties are ideal. - Factor in all costs.
Budget for property management, insurance, maintenance, and potential vacancies.
Is Rentvesting Right for You?
Rentvesting is a powerful strategy for building wealth and gaining early entry into the property market — without giving up lifestyle goals. While it’s not without its risks and responsibilities, the rewards can be significant when executed wisely.
Make sure you assess your financial situation, speak with a qualified mortgage broker or financial advisor, and focus on long-term goals. With the right strategy, rentvesting can be the key to breaking into the property market on your own terms.
