Renting + investing = rentvesting. You may have heard of it – it’s a bit of a buzzword on financial and investment forums at the moment. But what is rentvesting and what are the benefits?
What is rentvesting?
Rentvesting is a home ownership strategy that keeps people living in the area they want to, while keeping an investment property elsewhere.
For many, this means renting the property they live in and then purchasing a property in an area that is more affordable and within their financial means.
A lot of rentvesters are young people or couples who are looking for their first property to get into the housing market.
Those who rentvest buy an investment property and rent it out, generating income to help pay the mortgage and get them into the property market. All while maintaining their lifestyle, living in an area that they prefer.
Why rentvesting can work.
The key advantage of rentvesting is maintaining your lifestyle – by living in an area you want to, you can keep the amenities and community you know and enjoy. For younger people, this is especially appealing.
The reasons to rentvest don’t stop there though, rentvesting can also help with:
- being able to enter the property market earlier – buying a property in a more affordable area equals a lower deposit
- building your investment portfolio – you can use the property equity to buy additional properties in the future
- using rent to offset mortgage repayments – leasing the property out means that the tenant covers part of mortgage payments through their rent
- the tax advantages – owning an investment property does mean that you are able to deduct expenses on the property against your income during tax time, including:
- interest on your loan
- fees associated with property management
- rates and utilities
- repairs and maintenance
- general property depreciation.
Things to consider with rentvesting.
While rentvesting does have advantages, there are some things to consider before going down the rentvesting path.
- Forfeiting First Home Owner Grants (FHOG) – FHOGs are made available to those buying their first home through state government initiatives. They often have qualifying criteria that excludes people who are buying their first property for investment.
- Incurring Capital Gains Tax (CGT) upon selling – investment properties are often eligible for CGT when being sold. When selling an investment property, you can be taxed on the profit you make when selling the property, e.g. the difference between what the property was bought for versus how much it sold for. The ATO has a calculator for working out your CGT.
- Negative gearing changes – this year, the federal government made changes to our negative gearing structure, meaning that established properties purchased after 12 May 2026 will no longer be able to be negatively geared after 1 July 2027. This means that property owners who are renting their property at a loss will no longer be able to offset that against their personal income. Some new builds will be exempt.
For some, rentvesting is not desirable due to the complexity of managing an investment property that is not in the same city/region as them – owners must be organised and find a trustworthy property manager.
Not living in the property you own is also a deterrent from rentvesting. Some people don’t feel like they ‘own’ their home if they’re not living in it.
Making the decision.
Deciding whether to rentvest is a big decision – there are perks: getting into the property market sooner, keeping a flexible lifestyle and various tax concessions. But there are also considerations that need to be made: not being able to access First Home Owners Grant, paying CGT upon selling and recent changes to negative gearing.
If you’re ready to rentvest, invest or buy your first home, talk to one of our lending specialists today.
