What is rentvesting?
Rentvesting is a modern property strategy that’s gained popularity in Australia. The term is a mash-up of “rent” and “investing,” and it pretty much describes the approach: you rent the home you live in, while simultaneously investing in a property that you rent out to tenants. In other words, you become a renter and a real estate investor at the same time. This lets you live where you want (which might be somewhere you couldn’t afford to buy), yet still get on the property ladder by owning an investment property in a more affordable area.
Let’s break down how rentvesting works and why so many people – especially younger Australians – are considering it.
Getting into the property market.
How Does Rentvesting Work?
Imagine you love living in a trendy inner-city suburb close to work and cafes. Buying a house there might cost well over $1 million, which is out of reach for you right now. But you could comfortably buy a smaller apartment in a regional town or a house in an outer suburb for, say, $500k. With rentvesting, you continue to rent in your favorite area (paying your landlord there), and you purchase that more affordable property elsewhere to rent out to someone else. The rent from your tenants, plus potential tax perks from owning an investment, helps cover the mortgage on the property you own. Meanwhile, you enjoy living in the pricey location without the massive mortgage, because you’re renting there rather than owning.
This strategy has caught on as housing prices in desirable cities have skyrocketed. Younger buyers, particularly millennials and Gen Z, are drawn to rentvesting as a way to “have their cake and eat it too” – enjoy the lifestyle of their preferred location without sacrificing the goal of property ownership. In recent years, interest in rentvesting has surged. In fact, more than half of first-home buyers (54%) are now considering rentvesting to enter the market, according to a 2025 Westpac survey – that’s up from 50% the year before. It’s a significant trend shift in how people achieve home ownership.
Why Rentvest? (Pros)
There are several potential benefits to rentvesting which explain its rise in popularity:
Live Where You Want: You can rent in a location that suits your lifestyle – maybe close to work, or near the beach or city night life – without needing to buy there. If that area is too expensive to purchase in, renting can be far cheaper. Rentvesting lets you enjoy the lifestyle you love now, rather than moving to a far-flung area just to buy a home.
Get on the Property Ladder Sooner: By buying in a more affordable area, you often need a smaller deposit and loan, so you can purchase a property sooner than if you tried to save for an expensive city home. This helps young people start building equity earlier instead of being stuck renting indefinitely. Essentially, it’s a way around the “I can’t afford to buy in the city” problem – you buy somewhere cheaper and at least have a foothold in the market.
Build Wealth Through an Investment Property: The property you buy could appreciate in value over time, building your equity. Meanwhile, you might get rental income from tenants that covers part or even all of your mortgage repayments on that property. Ideally, the investment property “pays for itself” (or close to it) through rent. If property values rise, you gain capital growth as well. Later, you could sell it and use the profit to help buy your dream home, or keep it as a long-term investment.
Tax Benefits: In Australia, owning an investment property comes with potential tax deductions. You can usually deduct expenses like mortgage interest, property management fees, insurance, maintenance costs, and depreciation from your rental income. If the property runs at a loss (negative gearing), that loss can sometimes be used to reduce your taxable income (though tax laws change, so get advice). These tax breaks can make the cost of holding an investment property lower than it appears. When you’re renting your own home, you don’t get those deductions (since you don’t own it). So in a way, rentvesting channels more of your money into a tax-advantaged investment, rather than into non-deductible mortgage payments on a home you live in.
Flexibility: Rentvesting can be quite flexible. If your job or life changes and you need to move cities, it’s easier to end a lease and rent elsewhere while keeping your investment property, versus selling an owner-occupier home. You’re not locked into living in the one place you bought. Also, you can choose what to do with the investment property over time – sell it, move into it later, etc., depending on what makes sense.
Things to Watch Out For (Cons)
Rentvesting isn’t a one-size-fits-all miracle. There are trade-offs and risks to consider:
You’re Still Renting Your Home: As a renter, you don’t have the security or freedom of owning your residence. The landlord could decide to not renew your lease or raise the rent. You might feel less “settled” or unable to truly make the place your own (no major renovations, for example). Some people really value the sense of stability that comes with owning the roof over their head – rentvesting delays that. You might eventually get there (perhaps by selling the investment to buy a home later), but you’re a tenant in the meantime.
Being a Landlord Isn’t Free: Owning an investment property comes with ongoing costs and responsibilities. Think rates, insurance, maintenance, potential vacancies, and dealing with tenants or a property manager. The rental income isn’t 100% gravy – it often only partially offsets the mortgage and expenses. Plus, if something goes wrong (like a tenant damages the place or the hot water system breaks), it’s on you to fix it. Make sure to budget for these costs and have an emergency fund for the property. Managing a property remotely (since you live elsewhere) can also be challenging, which is why many rentvestors hire property managers (at a fee). It’s not exactly “set and forget.”
Financial Strain & Complex Cash Flow: In a best-case scenario, the rent covers most of your investment loan payments. But often in the early years it might not cover everything, especially if interest rates rise. So you could be paying rent for your home and topping up the mortgage for your investment at the same time. This double outlay can be tough if not carefully planned. Lenders will assess your ability to handle both, but life events (job loss, etc.) can strain your cash flow. It requires discipline – you must ensure you keep up with the investment loan, because if you default you could lose that property. Some advisers caution that rentvesting only works if you’re diligent with money. If you just rent and spend all your extra cash on lifestyle, without seriously investing, you could end up worse off than a regular homeowner. As one financial expert put it, the strategy only works “if you follow through with investing” – otherwise you’re simply renting and not building wealth.
Market Risks: There’s no guarantee your investment property will gain value or always have tenants. Property markets can fluctuate. You might buy in a “growth area” that doesn’t grow as expected. If the property’s value stagnates or falls, you don’t build much equity and might have been better off buying your own home in a stronger area. Also, if you have trouble finding or keeping good tenants, you could face periods of no rental income (while still paying the mortgage). It’s important to choose the investment property wisely – consider rental demand, vacancy rates, and long-term prospects of the area. Basically, you have to do your homework like any property investor would.
Missing First-Home Perks: Rentvestors often lose access to some first-home buyer benefits. For instance, if your first property purchase is an investment, you might not qualify for first-home owner grants or stamp duty concessions (since those usually require you to live in the property). You may also become liable for capital gains tax when you sell the investment (whereas your own home is usually exempt). These are not deal-breakers, but something to be aware of when crunching the numbers.
Is Rentvesting Right for You?
The appeal of rentvesting is strong for those who value lifestyle and see real estate as a wealth-building tool rather than just a place to live. It tends to suit people who:
Live in an expensive city (like Sydney or Melbourne) where buying a home to live in is prohibitively costly, but they still want to break into the property market somehow.
Are comfortable with renting and perhaps don’t mind moving around or living in an apartment, etc., and don’t need the psychological comfort of owning their home just yet.
Have an investor mindset – you’re willing to become a landlord, take on the additional responsibilities, and view the property purchase through a financial lens (yield, capital growth) rather than purely emotional. Often, “rentvestors” are quite savvy and do a lot of research on which areas are good to buy in.
Have the financial discipline to manage the potentially complex budget of paying rent and an investment mortgage. This might mean making sacrifices, like not using that equity to buy a fancy car or such – remembering that the end goal might be to accumulate enough to one day buy your own residence.
If that sounds like you, rentvesting could be a smart route. It’s effectively a stepping stone strategy. A lot of people plan to rentvest for a number of years, build up equity, then eventually sell the investment property (or leverage its equity) to buy a home in their desired area. By then, hopefully the gap is smaller – e.g., your investment grew in value, giving you a bigger deposit for your dream home, even as the dream home may have gotten more expensive too.
Let’s consider a simplified example: You have $100k saved. The house you’d love to live in costs $1M (out of reach), but you buy a $500k investment unit in a growth suburb. Over 5-10 years, that unit’s value goes up say to $650k. You’ve also been paying down the loan. Now you sell it, perhaps netting a few hundred thousand dollars after paying off the mortgage and taxes. That, combined with additional savings, might now give you enough for a 20% deposit on a $1M home – voila, you can finally buy your residence, which also likely appreciated in the meantime. Had you not rentvested, you might have just spent that decade renting and saving slowly while the market ran away. Rentvesting gave you exposure to the market gains.
Of course, that’s a rosy scenario – it assumes the investment performs well. It’s not guaranteed, which is why it’s important to choose properties with good fundamentals (and even then, diversify your overall investments if possible, since all your eggs in one property basket can be risky).
Final Thoughts
Rentvesting has been called an “innovative strategy that lets you enjoy the best of both worlds”. Indeed, many Australians are finding it a practical solution as traditional homeownership grows out of reach. It’s not without its challenges, and it certainly requires a bit more juggling than the straightforward “buy a home to live in” path. However, the numbers can stack up nicely. One analysis even suggested a rentvestor could be tens of thousands of dollars better off after a decade compared to an owner-occupier, under certain assumptions. While individual results vary, this highlights that renting isn’t necessarily “dead money” if you’re simultaneously investing smartly.
If you’re considering rentvesting, do your homework: Research locations, get a realistic sense of rental yields and expenses, and maybe talk to a financial advisor or mortgage broker. Ensure you can service both rent and loan comfortably (interest rates can change, so stress-test your budget). Also be mentally prepared to handle being a landlord or pay for property management.
In summary, rentvesting is about flexibility and forward-thinking. It asks, why not rent a home for lifestyle now, and invest for wealth and future home ownership? With over half of new buyers contemplating this approach, it’s gone from a niche idea to almost mainstream. Like any investment strategy, it has pros and cons, but for many it’s proving to be a worthwhile path to achieving their real estate goals in the long run.
