Rentvesting means renting the home you actually want to live in, while buying an investment property somewhere the numbers work better. It suits buyers priced out of their preferred suburb who still want to get into the property market. Instead of waiting and saving, they buy an investment property in an affordable growth area, rent it out, and keep renting where they want to live.
What is rentvesting?
Rentvesting is a property strategy, not a product. You buy a property to rent out as an investment, and you continue renting your own home rather than buying to live in.
For a lot of buyers in South East Queensland, the maths adds up. A unit close to work or family might cost well over what the budget allows to buy, but renting it is manageable. Meanwhile, an investment property in a growth corridor further out can be bought sooner, with rental income helping to cover the mortgage.
The strategy works because renting and buying are treated as separate decisions. Where you live is chosen for lifestyle. Where you buy is chosen for numbers: price, rental yield, and growth potential.
Rentvesting pros and cons
| Pros | Cons | |---|---| | Get into the property market sooner, in a suburb you can afford | You do not own the home you live in, so no security of tenure | | Rental income and expenses can offset the cost of the loan | Investment loan rates are usually a little higher than owner occupier rates | | Keep living where you want, close to work or family | Capital gains tax applies when the investment property is sold | | Can build equity while renting flexibly | May forfeit First Home Owner Grant or First Home Guarantee eligibility | | Interest and some costs are tax deductible on the investment property | Landlord costs: rates, insurance, maintenance, agent fees, vacancy periods |
How do the numbers compare with buying to live in?
Buying to live in means putting your full deposit and borrowing power into one property, usually the one you want to occupy long term. Rentvesting splits the equation. You put your deposit into a cheaper investment property, and your rent stays a separate, ongoing cost.
The comparison usually comes down to three things: purchase price, rental yield, and growth potential. A rentvestor might buy in a suburb where a house costs a few hundred thousand dollars less than their preferred area, with a rental yield that covers a good share of the repayments. The rent they pay to live where they want is then weighed against what they would have paid in loan repayments, rates, and maintenance on a home in that same suburb.
For many buyers priced out of their ideal area, rentvesting gets them into the market years earlier than saving for a larger deposit. For others, the ongoing cost of renting plus holding an investment property is higher than expected once vacancy periods and maintenance are factored in. Running the numbers properly before committing matters. Our investment property guide walks through the full calculation.
What are the tax implications?
Rental income from an investment property is taxable. Loan interest, property management fees, council rates, insurance, and many maintenance costs are generally tax deductible against that income.
If the deductible costs are higher than the rental income, the property is negatively geared, and the shortfall can usually be offset against other income, reducing tax payable. Our guide to negative gearing explains how this works in more detail.
Unlike your own home, an investment property is subject to capital gains tax when it is sold. Your main residence is generally exempt from capital gains tax, but a rentvested property is not your main residence, so this exemption does not apply.
This is general information, not tax advice. Every situation is different, and tax rules change. See an accountant before making decisions based on tax outcomes.
What do lenders think of rentvesting?
Lenders are comfortable with rentvesting. It is a common strategy, and most lenders factor in a percentage of the expected rental income as part of your serviceability assessment, alongside your existing rent payments and any other debts.
A few things to expect:
- Investment loan interest rates are usually slightly higher than owner occupier rates.
- Most lenders ask for a deposit of 10 to 20 percent for an investment property, though this varies by lender and by the property.
- Lenders mortgage insurance may apply below a 20 percent deposit.
- Your own rent payments are counted as a living expense in the assessment, which can affect borrowing capacity.
Where do rentvestors buy in South East Queensland?
South East Queensland has a number of growth corridors that suit rentvesting, where prices are more accessible than the inner city or coastal suburbs, and population growth is supporting demand for rentals.
Redbank Plains, Ripley, and Goodna are three corridors many rentvestors are looking at. They sit within commuting distance of Brisbane and Ipswich, have ongoing infrastructure and housing development, and offer entry prices well below many inner suburbs. Rental demand in these areas has generally kept pace with the new supply, which matters for a rentvesting strategy that relies on tenants covering a share of the loan.
Each suburb has its own price point, rental yield, and growth profile, so it is worth looking at them individually before deciding where to buy.
What are the risks?
Rentvesting is not risk free. The main risks to weigh up:
- Vacancy periods. If the property sits empty between tenants, you are covering the full loan repayment yourself while also paying your own rent.
- Rate rises. An increase in your investment loan rate affects your cash flow differently to an owner occupier, since you do not get the benefit of living in the property rate free.
- Maintenance and unexpected costs. As a landlord, you are responsible for repairs, insurance, and compliance costs that a tenant would not typically cover.
- First home buyer scheme eligibility. The First Home Owner Grant and First Home Guarantee generally require you to live in the property, usually within a set timeframe and for a minimum period. Buying an investment property first, rather than a home to live in, usually means forfeiting access to these schemes for that purchase.
This is credit assistance content, not financial or tax advice. It is general information only and does not take into account your personal circumstances.
Weighing up rentvesting? Book a call with Tom Smith at Kookaburra Finance, Springfield Central. We're FBAA members, accredited with 60+ lenders, and there's no cost to you. Get in touch.