Rentvesting is a property strategy where a person rents in the location they want to live — typically a more expensive area — while simultaneously purchasing an investment property in a more affordable or higher-yielding location. It allows people to enter the property market without compromising their lifestyle location preferences.
How rentvesting works:
1. The rentvestor rents accommodation in their preferred suburb (e.g. inner-city Sydney or Melbourne).
2. They purchase an investment property in a more affordable market where their deposit and borrowing capacity allows them to buy (e.g. regional Queensland, western suburbs of Perth, or an outer-ring city suburb).
3. Rental income from the investment property partially offsets their own rental payments and the holding costs of the investment loan.
4. The investment property builds equity and appreciates over time, allowing the rentvestor to eventually use that equity to purchase their own home or fund additional investments.
Advantages:
– Enters the property market sooner by targeting a more affordable first purchase
– Investment property costs are tax-deductible (including interest, management fees, depreciation)
– Maintains lifestyle flexibility — not locked into living in the investment property’s location
– Builds a property portfolio from a younger age
Considerations:
– No access to first home buyer concessions on investment property purchases
– No primary residence CGT exemption on the investment property when sold
– Must continue renting while the investment property is tenanted
Rentvesting is most effective when the investment property is genuinely selected for investment merit — not just affordability — and the investor has a clear plan for how the strategy evolves over time.
