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What is rentvesting and is it a good idea?

Discover the benefits of rentvesting and how it compares to buying a home. This comprehensive guide offers tips and strategies for potential rentvesters in Australia.

  • Live where you love, invest where it makes sense. Rentvesting lets you enjoy your dream lifestyle while building wealth through property ownership in a location that suits your budget.
  • Balance flexibility with smart planning. This approach can offer freedom and potential financial benefits, but it’s important to weigh up the costs and risks before diving in.

Rentvesting is a property investment strategy where individuals rent a home in a location that suits their lifestyle while owning an investment property in a more affordable area. This approach allows people to live where they want without compromising on their investment goals. It is especially popular among younger buyers who are priced out of the housing market in their desired locations but still want to build equity through property ownership.

Rentvesters can use resources like online property reports from home lending specialists to understand which suburbs might be good investment opportunities as compared to suburbs they might be drawn to live in. This could help them make a more informed decision about where to put their money.

Rise in popularity

In recent years, rentvesting has seen increasing interest in Australia. The rise in popularity can likely be attributed to several factors, including skyrocketing property prices in desirable inner-city areas and the preference for the flexible lifestyle these locations offer. As homeownership becomes increasingly unattainable for many, rentvesting offers a viable alternative for first home buyers (FHBs) and investors alike.

Who are rentvesters most likely to be?

It primarily appeals to younger buyers, particularly millennials and Gen Z, who value the  lifestyle and location ease in high-demand areas but face financial barriers to purchasing homes there. This property investment strategy also attracts savvy investors looking to maximise their returns by purchasing properties in growth areas while enjoying the benefits of living in their preferred location.

Why rentvest?

There are several reasons why some individuals might consider this method:

  • Lifestyle flexibility:  Live in a location that suits their lifestyle, letting them be closer to things like work, amenities, or social hubs, without the financial burden of purchasing property in that area
  • Affordability: By buying an investment property in a more affordable area, rentvestors can enter the property market sooner and start building equity without waiting to save for a larger deposit.
  • Potential for rental income: Owning an investment property can generate rental income, which can help cover mortgage repayments and other expenses.
  • Tax benefits: Rentvestors may be eligible for tax deductions on their investment property, such as interest on the mortgage, property management fees, and maintenance costs.

Considerations with rentvesting

While rentvesting could offer numerous benefits, it's essential to consider its potential drawbacks as well:

Pros:

  • Ability to live in a desirable location
  • Potential for rental income and tax benefits
  • Opportunity to build equity in an investment property

Cons:

  • Less security in your primary residence
  • Ongoing costs of homeownership and property management
  • Potential challenges in managing an investment property remotely

Rentvesting is an innovative strategy that allows some people to enjoy the best of both worlds: living in a location that suits their lifestyle while building wealth through property investment. As property prices continue to rise, rentvesting offers a practical solution for first home buyers and investors looking to enter the market without compromising on their living arrangements. By understanding the benefits and challenges of rentvesting, you can make an informed decision about whether this strategy is right for you.

We're here to help

Download our complete guide to investing in property, made easy. Our expert lenders can help guide you through the entire process from start to finish. Once you’re a landlord, working with a property manager can help you manage tenants and your property going forward. Speak to a home lending specialist to discuss buying your next investment property

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This article provides general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as personal financial product advice. The views expressed by contributors are their own and don’t necessarily reflect the views of CBA. As the information has been provided without considering your objectives, financial situation or needs, you should, before acting on this information, consider what is appropriate for your circumstances, and where appropriate, consider the relevant Target Market Determination, Product Disclosure Statement and Terms and Conditions available on our website. You should also consider whether seeking independent professional legal, tax and financial advice is necessary. Every effort has been taken to ensure the information was correct as at the time of printing but it may be subject to change. No part of the editorial contents may be reproduced or copied in any form without the prior permission and acknowledgement of CBA.