For many Australians, the dream of owning a home in their ideal location feels increasingly out of reach. High property prices, rising interest rates and cost-of-living pressures make it difficult to buy where you want to live. But what if there was another way? Enter rentvesting – a strategy that allows you to rent where you want while investing in property elsewhere.
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Rentvesting: What It Is & How It Works
Rentvesting is a property investment strategy where you rent a home that suits your lifestyle while purchasing an investment property in a more affordable or high-growth area. This allows you to get on the property ladder without compromising on where you live.
As home prices in inner-city areas continue to rise, rentvesting has become increasingly popular, particularly among younger buyers looking for an alternative investment property strategy that aligns with their financial goals. Instead of waiting years to save for a home deposit in expensive locations, rentvesting allows you to buy in affordable or high-growth suburbs, benefiting from capital appreciation and rental income while still enjoying the lifestyle you want.
Why Rentvest?
On the surface, rentvesting might seem counterintuitive—why rent a home while also paying off a mortgage on an investment property? Wouldn’t it be simpler to just buy a home to live in?
The best approach depends on your finances, the lifestyle you want, and your future goals.
For instance, you might be keen to enter the property market but can’t yet afford to buy in your ideal location. Or maybe you’ve found the perfect rental but aren’t financially ready to purchase there. Rentvesting gives you the best of both worlds—the flexibility to live where you want while building wealth through property investment.
With this strategy, you rent a home that suits your lifestyle while earning rental income from your investment property. If your investment is positively geared, that income could even help cover your own rental costs, making rentvesting a smart and strategic financial move.
Rentvesting Pros and Cons
Pros
- You get to live where you want – As a rentvestor, you’re not limited to where you can afford to buy.
- Low maintenance costs at your rented home – Tenants typically aren’t responsible for maintenance costs due to natural wear and tear.
- Potential tax benefits – You may be able to claim certain investment property expenses as tax deductions such as interest repayments, property management fees and depreciation.
- Rental income – You can use income from leasing out your investment property to help pay down the mortgage or even cover your own rent.
- Potential capital gains – If your investment property increases in value, you could sell it at a profit later down the line.
Cons
- Less security in your primary residence – Renting means you may have to move if the owner decides to sell or change tenants.
- Ongoing home ownership costs – As a landlord, you’ll be responsible for repairs, property management fees and other expenses.
- Capital Gains Tax liability – If you sell your investment property, you’ll need to pay tax on any capital gains, whereas owner-occupied properties are often exempt.
- Limited access to First Home Owners Grant – Rentvestors may still be eligible for the First Home Owners Grant if they live in the property as their primary residence for at least 12 months before renting it out. Eligibility requirements vary by state, so it’s important to check local regulations.
- Potential capital loss – If your investment property decreases in value, you might have to sell at a loss.
How to Start Rentvesting
If you’re considering rentvesting, getting tailored financial advice is essential. At Carbon, we understand that every investor’s situation is unique, which is why we provide personalised strategies that align with your financial goals. Beyond securing a loan, we take a holistic approach to financial services. Our finance brokers, accountants and financial planners collaborate to ensure every aspect of your investment strategy is aligned and working towards your success. With a fully integrated team, we offer cohesive support, making sure your property investment is structured for long-term financial growth and sustainability. We can help you:
- Assess your borrowing power and structure your loan correctly, ensuring it aligns with your long-term financial goals.
- Connect you with trusted property investment experts who specialise in identifying high-growth opportunities using data-driven insights.
- Optimise your tax position and cash flow to maximise investment benefits.
- Provide a tailored, strategic approach that integrates property investment into your broader wealth-building plan.
- Rather than just securing a good rate, we focus on helping you build long-term wealth with the right financial strategy.
Who Should Consider Rentvesting?
Rentvesting can be a smart move for:
- First-home buyers who want to enter the property market but can’t afford to buy in their desired location.
- Investors looking for capital growth vs rental yield opportunities.
- Those who value lifestyle flexibility while building equity in an investment property.
When is Rentvesting a Bad Idea?
Rentvesting might not be the best choice if:
- You prefer the stability of homeownership without the uncertainty of renting.
- You are not comfortable managing an investment property or handling maintenance costs.
- You lack the financial buffer to cover rental gaps or unexpected expenses.
However, with the right expert support and financial planning, these challenges can be managed. A well-structured investment strategy, professional property management and financial buffers can help mitigate risks, ensuring that rentvesting remains a viable and beneficial approach.
Can I Live in My Investment Property Later?
Yes! However, tax implications such as Capital Gains Tax (CGT) may apply if you later sell the property. Consulting with a financial advisor can help ensure you structure your investment properly.
Is Rentvesting the Right Strategy for You?
Rentvesting is just one of many property investment strategies available, and it may or may not be the best fit for your financial goals. A well-planned strategy should consider your lifestyle, long-term financial objectives and risk tolerance.
We offer tailored advice to help you explore the best investment approach for your situation. Our advisors work together to ensure that every aspect of your financial plan is aligned and structured for success. We help you:
- Structure your loan correctly to align with your long-term wealth goals.
- Maximise tax benefits and cash flow to make rentvesting financially sustainable.
- Identify high-growth investment opportunities using real market data.
- Navigate complex lending and finance strategies beyond just securing a good rate.
Want to see if rentvesting is the right move for you? Get in touch with Carbon today for expert advice on property investment strategies.
