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Why Aussies are choosing to rentvest

The first property you purchase doesn't have to be your dream home. Rentvesting could be your path into the property market.

Why Aussies are choosing to rentvest

10 May 2022

The first property you purchase doesn't have to be your dream home. Rentvesting could be your path into the property market.

Rentvesting is when a buyer purchases a home as an investment, while continuing to rent a home which they live in.

We spoke with a financial expert to find out the pros and cons of rentvesting — and how to do it successfully.

Why rentvest?

When looking to enter the property market, a lot of people find themselves unable to find a property that meets their size and location needs within their budget.

This is typically where the appeal of rentvesting sets in, says Tina Wodecki, home loan specialist and Franchise Principal at RAMS Ryde, NSW.

"Rentvesting is a great way for first home buyers to get into the property market," Wodecki begins.

"It allows you to continue to rent where you love to live, without changing your lifestyle, while you invest in a property that could have high rental returns or capital growth.

"The great thing about this strategy is that you don’t have to wait a long time [to enter the market] as you can buy something you can afford now. More importantly, your lifestyle does not have to change.

"This is especially important for families who have children in schools as it means not uprooting the family into a new area."


You might not be able to afford the right home for your needs, but that doesn't mean you can't enter the property market. Picture: Pexels

Who should rentvest?

While anyone can choose a rentvesting strategy, Wodecki says that it's a particularly appealing strategy for first home buyers.

Even though, in most states, not living in your first property purchase precludes you from accessing a First Home Owners Grants (FHOG) or stamp duty concession, rentvesting could help you enter the market sooner, she says.

"If you love where you live but can’t afford to buy there, then rentvesting could be for you," Wodecki adds.

What are the pros and cons of rentvesting?

Pros of rentvesting:  

  • It can enable you to enter the property market sooner by buying an affordable property, as opposed to a more-expensive 'dream home'.
  • You can enter the market without any major disruptions to your current life and living situation.
  • You can reap the benefits of living in a location you prefer, such as closer to work or among better lifestyle offerings.  

Your first home purchase doesn't need to be your forever home. Picture:

Cons of rentvesting: 

  • Depending on your state's rules, you may not be able to access the FHOG or stamp duty concessions (which in most states requires the recipient to live in their purchased home for at least six months).
  • You have to balance paying rent and paying off your mortgage. Ideally, the rental returns on your investment will be enough to service your mortgage. However, if you make a poor investment choice, you may end up financially worse off. 

Does rentvesting affect your borrowing power?

Yes — hopefully, for the better. To reap the greatest benefits, your rentvestment should be positively geared, i.e., it should generate more in rental income than the cost of your mortgage repayments and any other fees (e.g. council rates), Wodecki advises.

"You will find that if the property you are buying is positively geared, it will increase your borrowing power significantly compared to a negatively geared property," she explains.

"If you are told that you are capped with your borrowing power, then you should consider investing in properties that will increase your income, such as dual rental properties — like duplexes or houses with a granny flat to rent out.

"As always, ensure you talk to a home loan specialist for tailored advice."


Positive gearing means your rental returns are greater than your mortgage repayments. Picture:

So, where should you start?

Of course, once you decide you want to rentvest, you still need to turn the strategy into reality.

Wodecki says if you're thinking about rentvesting, you should speak to the experts to work out what property will best suit your circumstances.

"The strategy will require advice from your accountant, home loan specialist and a buyer's agent to ensure the property is the right one for you," she says.

Furthermore, if you're thinking of rentvesting, don't sit around waiting for the perfect property. You should use a different set of criteria for picking out an investment property to what you would for your own home.

"A lot of people make the mistake of thinking you should buy a home to live in, then think about property investing after," Wodecki explains.

"They are prepared to wait years until they have enough of a deposit, not realising that, as their deposit increases, so do property prices.

"This is one of the reasons why first home buyers are struggling to get into the market whilst successful property investors often have multiple properties in their portfolio."

This article was originally published on, ‘Why Aussies are choosing to rentvest

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