Introduction
Rentvesting is an alternative path to property ownership that lets you rent where you want to live and invest where you can afford. For young professionals or anyone priced out of their preferred suburb, rentvesting provides a way to enter the market and build wealth without compromising lifestyle.
What Rentvesting Actually Means
Rentvesting involves purchasing an investment property – often in a more affordable location – while continuing to rent in your chosen suburb. You lease out the property you own and use the rent and any tax benefits to help pay the mortgage. Meanwhile, you enjoy the flexibility of renting in an area that suits your work, family or lifestyle.
Why Australians Choose Rentvesting
Many Australians are turning to rentvesting because it offers freedom and opportunity. Renting allows you to live closer to work, schools or amenities without the massive mortgage that typically comes with those areas. Investing in a property elsewhere can allow you to start building equity sooner, benefit from capital growth in up-and-coming areas and potentially claim tax deductions.
Pros and Cons to Weigh Up
- Flexibility: you live where you want without being tied to a big mortgage.
- Wealth building: owning an investment property allows you to start building equity sooner and diversify your assets.
- Tax benefits: you may be able to claim deductions on interest and expenses.
- Ongoing costs: you pay rent and mortgage at the same time, plus maintenance and management fees on the investment property.
- No grants:rentvestors often miss out on the First Home Owner Grant (FHOG)and other incentives for owner occupiers.
- Capital gains tax: you may pay tax on any profit when you eventually sell your investment property.
Common Rentvesting Traps
Rentvesting requires careful planning. Overborrowing can create cash flow pressure if rental income doesn’t cover loan repayments. High interest rates can erode returns. Failing to factor in vacancy periods, repairs or insurance can also hurt your budget. It’s wise to explore investment loan options on our Investment Loans page and to look at Home Loans if you decide to move in later. ASIC’s investing guidance has a useful guide on property investing. Real stories from our client stories page show the varied journeys rentvestors take. Don’t forget to run the numbers using our loan calculators.
Conclusion
Rentvesting can be a savvy strategy to get onto the property ladder while preserving your desired lifestyle. By renting where you love and investing where it makes financial sense, you could benefit from both comfort and capital growth. Speak with a Zippy broker to discuss your plans and ensure rentvesting suits your circumstances. This article is general information only and not personal financial advice.