Rentvesting means renting the home you actually want to live in while buying an investment property somewhere you can afford, rather than waiting years to save enough for a home in the suburb you would rather rent in today. It has become a common strategy as prices in lifestyle and inner-city suburbs continue to outpace what many first-time buyers can borrow, without giving up on getting into the property market at all. For investors who eventually want to build a portfolio rather than stop at one property, it can also mean starting sooner with a lower price point instead of stretching for a first home that uses up most of your borrowing capacity in one go.
Why Rentvesting Appeals to Priced-Out Buyers
The gap between what it costs to rent in a suburb and what it costs to buy there has widened in a lot of capital cities, particularly inner and middle-ring areas close to work and lifestyle. Renting in that kind of suburb while it remains out of reach to buy, and instead purchasing an investment property in a more affordable growth area, lets you start building equity now instead of waiting for a deposit big enough to buy where you currently live.
It also keeps your living situation flexible. You are not locked into one suburb or one job location the way owning your home outright would require, which suits people whose work or lifestyle plans are not fully settled yet.
How Lenders Assess a Rentvesting Application Differently
Your own rent is treated as an ongoing living expense in a lender’s serviceability assessment, the same as it would be for anyone renting. That reduces your borrowing power to some extent compared with someone who owns their home outright and has no rent to pay.
On the other side, most lenders count only a portion of the rental income the new investment property is expected to generate, often somewhere between 75% and 80% of the gross rent, rather than the full amount, to allow for vacancy periods and running costs. A smaller number of lenders will count the full expected rent, so which lender you apply with can genuinely change how much you are able to borrow for the same property.
The Trade-offs Nobody Mentions
Buying an investment property as your first purchase generally means giving up first home buyer grants and stamp duty concessions, since most state schemes require you to actually live in the property to qualify. That is worth weighing carefully if those concessions would otherwise be significant.
There are tax implications too. Negative gearing and capital gains tax both apply differently to an investment property than they would to your own home, and the rules depend on your personal circumstances, so it is worth getting advice from a qualified tax professional before you commit to a rentvesting strategy rather than assuming the numbers work the same way they would for an owner-occupier purchase.
Can I Still Use First Home Buyer Schemes If I Rentvest?
In most states, no, not for that first purchase. First home buyer grants and stamp duty concessions are generally tied to actually living in the property, so buying an investment property before you buy a home to live in usually means forfeiting those benefits for good, not just delaying them. It is worth confirming the exact rules in your state with a broker before deciding, since the details do shift from state to state.
Making the Numbers Work
Getting the loan structure right from the very first purchase matters more in a rentvesting strategy than it does for a single home purchase, because how that first loan is set up affects how easily you can add a second or third property later. Avoiding unnecessary cross-collateralisation between properties, and choosing principal and interest or interest-only repayments deliberately rather than by default, both make a real difference down the track.
Borrowing capacity for a rentvesting strategy also depends heavily on how your file is presented, since different lenders shade rental income and treat your own rent differently. Comparing that across lenders before you commit to one is where a broker earns their place in the process, rather than after you have already signed with the first lender you spoke to. Getting this right early also makes it easier to refinance efficiently down the track, since a clean structure from day one avoids the extra cost and paperwork of untangling cross-securitised loans later.
Key Takeaways
- Rentvesting means renting where you want to live while buying an investment property somewhere more affordable, rather than waiting to buy where you live.
- Lenders count your own rent as an ongoing expense, then usually assess only 75% to 80% of expected rental income from the new property, though this varies by lender.
- Buying an investment property first generally means forfeiting first home buyer grants and stamp duty concessions in most states, since those require you to live in the property.
- Negative gearing and capital gains tax apply differently to an investment property, and it is worth getting professional tax advice before you commit.
- How your loan is structured from the first purchase affects how easily you can add a second or third property later.
- Borrowing capacity for a rentvesting strategy depends heavily on how a broker presents your file across different lenders.