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When it comes to buying investment properties, younger Australians are punching above their weight, with Millennials taking the title as the nation’s most active generation for property investment. 

Investors are continuing to flock to the property market, with the Australian Bureau of Statistics saying the volume of new investor loans in February was 21.5% higher compared to a year ago

Investment loans now make up half of the growth in new loans over the past year. But in an unexpected twist, it isn’t older generations of Australians who are leading the charge to buy rental properties. 

Younger investors flex their muscles

New data from the Commonwealth Bank shows Millennials (those born between 1981 and 1996) accounted for almost half (46%) of the bank’s new property investors in 2023. And almost one in three of those buyers purchased an investment property on their own, without the help of a partner. 

Gen Xers (1965 to 1980) are also snapping up rental properties, accounting for 37% of CommBank’s new investment property loans in 2023. 

Rentvesting – get into the market sooner

Rentvesting is buying property where you can afford, possibility a smaller property in a lower-cost area, and then renting where you want to live. 

The CommBank data shows plenty of investors are taking this approach and it makes sense. The average investment loan size is just over $528,000 compared to $624,000 for owner occupiers. And remember, if you purchase the right property, as an investor you could expect to earn rental income. That is extra cash for loan repayments.

In this way, rentvesting could be an opportunity to get started on the property ladder sooner rather than later, without having to make too many lifestyle sacrifices. As the investment property grows in value over time, it can become the stepping stone to buy an owner-occupied home. 

The market seems attractive for investors right now

The property market offers plenty of appeal to investors right now. Rental vacancy rates are at a record low of just 0.7% nationally. Property listings have increased in most cities, giving buyers more choice, and the past 12 months have seen rents skyrocket 11.4% across our state capitals. 

Add in growing expectations that interest rates will start to fall later this year, and CoreLogic says it is likely that property values will continue to rise, giving those today who buy the potential to notch up handy capital gains. 

Are you ready to become a property investor?

Talk to us today to find out how much you could borrow, and your likely loan repayments. It could help you become a property investor sooner!

Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial. 

The Risks and Rewards of Rentvesting

rewards of renvesting

Most people have heard of rentvesting: it’s where you rent where you want to live, but buy a property where you can afford.

It means you can keep renting in the area where you have built your life, but to get your foot on the property ladder, you buy a property in a different suburb, city or even state.

You might be renting in an area where the rent is manageable, but the cost of buying is well out of your reach. This is the kind of scenario that rentvesting is perfect for.

Is Rentvesting Really the Answer to Affordability Issues?

Here’s the reality: as property prices continue to climb upwards, many potential homebuyers have found themselves priced out of parts of major cities such as Sydney and Melbourne.

Property prices across the country are booming right now, so if you can’t afford to buy now in the area you’d prefer, it’s likely to be even less affordable a year or two from now.

That’s why many people are now exploring alternatives, to be able to get a foot in the door of the property market!

Is reinvesting a perfect solution? Not always. There are some downsides, which I’ll get to in a moment. But first, let’s discuss some of the benefits of rentvesting.

Benefits of Rentvesting

You Live Where You Want to Be – without Paying the Exorbitant Price

Renting a home is cheaper to sustain financially than buying in many areas. You might be paying $600 in rent on a home that costs $800,000 to buy. You will need a minimum of $80,000 deposit (or more to avoid paying LMI) and this is out of reach for many. But a $40,000 deposit on a cheaper investment property could be more achievable – and you don’t have to give up living in your ideal spot.

You Free Up Your Money to Invest Wisely

As a property investor, you want to have your finger on the pulse of where capital growth is happening. As a rentvestor, you may be able to purchase a greater number of inexpensive properties with long-term high growth and rental potential, rather than sinking all of your money into one expensive home.

You Don’t have to Put Down Roots Yet

If you’re at a point in life where you’re still not sure where you really want to be for the long term, rentvesting allows you to enter the property market without having to lock yourself down. You can still move, travel, even accept that job in another state, with the comfort of owning an asset (which your tenant is helping you to pay off).

You can Claim Tax-related Benefits

As a property investor, you’re able to claim deductions like mortgage interest, depreciation, insurance, real estate agent’s fees and maintenance. When you’re a homeowner, none of these expenses are tax deductible! This is one the key aspects of rentvesting that can really add appeal.

How Does Rentvesting Actually Work?

The best way to explain it is through a hypothetical example.

A young couple in their early 30s began rentvesting. They want to keep living in a capital city for their careers, but buying a home in their local area was well out of their price range – and they couldn’t see a time when it would become possible.

Instead of buying in Sydney, they chose to rent a place in their ideal suburb, while saving up for a property located in the Gold Coast – an area they chose for its relative affordability, rental demand and growth potential.

They bought an investment property for $400,000. A few years later, they used the growth in that investment to purchase a second investment property for $500,000. Five years later, they refinanced both investment property loans, and withdrew enough money to use as a deposit on a small home in Sydney.

Thanks to rentvesting, they were able to eventually buy their own home in Sydney, and they also now own three property assets. Now 40, they have plenty of options ahead of them:

  • Sell all three properties and use the profits to buy a bigger home.
  • Keep all three properties, and use the growth/equity to buy a bigger home as their needs change.
  • Keep going in their current set-up and reassess as their needs change.

This is a far better outcome than simply continuing to rent and saving for a property deposit for years and years…

That said, rentvesting does come with a few risks and downsides you need to be aware of:

Some Risks of Rentvesting

You Continue to be Tied to Your Landlord

As a tenant, you are not the one with control over your living space. That means that even when you are able to live in your dream location, you are not necessarily living in your dream home.

You’re at the Whim of the Rental Market

 If your landlord wants to hike the rent, sell the property or make any other big decisions, it’s completely out of your control.

You Miss Out on Government Benefits only Owner-occupiers can Claim

You won’t be eligible for the First Home Owners’ Grant and stamp duty concessions, which can be worth tens of thousands’ of dollars. Unfortunately, once you buy a home as an investor, you lose access to their grants and discounts for good.

There’s pros and cons to weigh up on both decisions, but the bottom line is: if you dream of owning a property, now is the time to look at all the options and make a plan to move you forward. If you’d like to find out your borrowing power and chat about your options, contact us today for an obligation-free chat on 1300 855 022.

Frequently Asked Questions

What is Rentvesting?

Rentvesting is a strategy where you rent in the area you want to live while buying a property in a location where you can afford. This allows you to get your foot on the property ladder without compromising your lifestyle.

What Are the Benefits of Rentvesting?

Rentvesting offers several benefits, such as living where you want without the high cost of buying, freeing up money for wise investments, not having to put down roots yet, and claiming tax-related benefits as a property investor.

How Does Rentvesting Work?

Rentvesting involves renting a home in your preferred area while buying an investment property in a more affordable location. The growth in your investment can later be used to purchase additional properties or even a home in your desired area.

Are There Any Risks Associated with Rentvesting?

Yes, there are some risks, such as being tied to your landlord’s decisions, being subject to the whims of the rental market, and missing out on government benefits only available to owner-occupiers.

Can Rentvesting Help Me Buy a Home in My Preferred Area Eventually?

Yes, the growth in your investment property can be used to eventually buy a home in your preferred area, as illustrated in the article’s hypothetical example.

How Can Zippy Financial Assist Me with Rentvesting?

Zippy Financial specializes in home loans, property investment, and commercial lending. They can help you understand your borrowing power and find the right loan for your rentvesting strategy.

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business. 

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).    

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.  r-less normal distribution of letters. making it look like readable English.

RELATED ARTICLES 

We’re being inundated with enquiries from first homebuyers at the moment, who are all keen to take advantage of record-low interest rates to get into the property market. 

With mortgage rates so low, it’s a great time to think about buying a home, and at Zippy, we love the opportunity to help everyday Australians reach their dream of owning property. 

But we’re finding a recurring theme with the first home buyers who are coming to us right now – and it’s holding them back from getting started. 

Taking Your First Step on the Property Ladder 

It reminds me a little of leaving school. For some people, the path after high school leads to university. And sometimes, people can have an expectation that they’ll graduate, swiftly land an executive job and start earning six figures from day one. 

The reality isn’t quite like that. You have to start somewhere. Usually, you start in a junior role, learn about the industry and work your way up. Then, as your knowledge and experience grow, your climb your way up the career ladder.  

Some people may be able to skip some steps and take a different path. But for the majority of us, this is the recipe to career success: hard work, grit, determination, and time.  

The same philosophy applies to buying a home. Unless you have a hefty inheritance or financial gift to give you a leg up, saving a deposit to buy a home in a city like Sydney or Melbourne isn’t going to be easy. This leads me to the dream home myth that’s holding people back… 

The Dream Home Myth 

Just as you don’t step out of university and into a high-paying executive job, it’s unlikely you’ll be able to step from your rental home into your ideal dream home.  

And if you hold on to the idea that your first home should be your dream home, you might delay your ability to buy a home by months, years… or even indefinitely.  

Here’s the truth: for many first home buyers, your first home won’t be anywhere near your dream home. And that’s okay. In fact, that’s really normal.  

You may not be able to buy in your ideal area, with your ideal number of bedrooms and with the kitchen you’ve been building in your mind for the past decade. 

But you will be able to take your first step on the property ladder – and that is going to lead you towards your ultimate goal. 

Getting Realistic about Your Next Step 

We’re getting a lot of enquiries from first home buyers at the moment and their wish list is not easy to achieve. They want to live…

Often, these homes have a price point of $1.5 -2m (or even higher), which means these first homebuyers are toiling year after year to save a deposit. It’s disheartening and heartbreaking, and it’s understandable why so many people feel that buying a home is never going to happen for them.  

But, there is an alternative.  

If you can adjust your thinking and get realistic about what’s possible, you could find yourself owning a home sooner than later. 

It’s about adjusting expectations: to get your first house, you start small, in an area that you can afford. It might mean you buy a house in a different suburb for $750,000, then wait until that grows in value and leverage into something closer to the city. 

You don’t have to live in it – you might decide to rentvest instead, where you continue renting in your desired suburb, but buy a home where you can afford it. Want to learn more about rentvesting and how it could help you get onto the property ladder? Read our article ‘The risks and rewards of rentvesting.’

After 2 or 3 years, you buy a townhouse, a little closer to town. Before long, you work your way up to a freestanding house in your ideal suburb. 

The sooner you get started in the property market, the sooner you can get on the path towards owning your dream home, on the beach, with a brand new kitchen and a pool. And it all starts with letting go of the myth that your first step on the property ladder needs to be your dream home. 

If you’d like to find out more about getting started in the property market, get in touch with Zippy Financial today. Buying your first home is an exciting time but it can also be stressful. It is not uncommon to feel a little overwhelmed by the whole process, but with us on your side we can make buying your home much, much easier.  

Phone: 1300 855 022             
Email: clientservices@zippyfinancial.com.au


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business. 

About the Author:  

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.  

Connect with Louisa on Linkedin

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025). 

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial. 

Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.