If you can afford to buy a property but you’re not wanting to move or buy the home you live in, you can continue renting while buying an investment property.
This strategy is commonly known as rentvesting.
For some buyers, it can provide a way to enter the property market while continuing to live in an area or type of property that suits their lifestyle.
But rentvesting isn’t automatically a better strategy than buying your own home. The important question is whether it makes sense for your goals, borrowing capacity, cash flow and long-term plans.
Quick Answer
If you can afford to buy, you don’t necessarily need to buy the home you live in. Rentvesting may make sense if the properties you would want to live in are significantly more expensive than the type of property you could comfortably purchase as an investment, or if you value renting in a particular location while building property ownership elsewhere. It also works for young people who can afford to buy a property but also want to continue living at home or renting close to work or study. However, there are trade-offs. Buying an investment property means taking on debt, ongoing ownership costs and investment risk while continuing to pay rent. You may also need to consider how purchasing an investment property could affect your future borrowing capacity and eligibility for certain first-home buyer benefits or government schemes. The right decision therefore isn’t simply “Can I afford to buy?” It’s: “Which property strategy best fits what I’m trying to achieve?”What Is Rentvesting?
Rentvesting is where you rent the property you want to live in while owning a property somewhere else as an investment. The idea is relatively simple. You might want to live close to work, family, restaurants, beaches, schools or a particular lifestyle. But buying a property in that area may require significantly more borrowing than buying an investment property in another location. Rather than compromising on where you live, you could rent where you want and invest where the numbers and your lending position make more sense. That doesn’t mean buying the cheapest property you can find. The investment still needs to be assessed carefully for factors such as purchase price, rental income, ongoing costs, location, property type and your longer-term objectives.Why Would Someone Rent Instead of Buying Their Own Home?
There are several reasons.You may prefer to live somewhere you can’t yet justify buying
You might love your current suburb but find that purchasing the type of property you want there would require substantially more debt. Renting can allow you to live in the location you prefer without committing your entire borrowing capacity to buying there.You may want to enter the property market sooner
Waiting until you can afford your ideal home isn’t necessarily the only path into property ownership. Some buyers may be able to purchase an investment property earlier than they could afford the home they ultimately want to live in. Whether that is sensible depends on the property, lending strategy and the buyer’s circumstances.You may prioritise lifestyle
A person might choose to rent because they want flexibility around where they live. For example, they may want to be close to the CBD, the beach or their workplace while buying an investment property in another market. The decision isn’t necessarily about being unable to afford a home. It can be about where they want their money and borrowing capacity working hardest for their overall goals.But Isn’t Buying Your Own Home Better?
Not automatically. Your principal place of residence can provide important benefits, and buying your own home may be exactly the right decision for you. But there is no universal rule that says your first property must also be your forever home. The better comparison is between the two strategies.Strategy 1: Buy the home you live in
You own your residence and no longer have rent to pay. You may also benefit from home ownership security and, depending on the circumstances and property, future capital growth.Strategy 2: Continue renting and buy an investment
You continue paying rent but own an investment property that generates rental income and may appreciate over time. You remain responsible for the investment property’s loan and ownership costs, and you still have to manage the risks associated with property investment. Neither strategy automatically wins. The outcome depends on the individual’s circumstances and the properties being compared.What About Townhouses, Units and Properties Outside the CBD?
Rentvesting doesn’t mean that an investor automatically needs to buy a unit in the CBD. This is an important misconception. Depending on the market, there can be townhouses, houses and other property types at very different price points. For example, in parts of Moreton Bay, a townhouse can cost more than some units closer to Brisbane’s CBD. The point of rentvesting isn’t to follow a formula such as “buy a cheap unit in the city.” It’s to consider where your available capital and borrowing capacity may be best deployed based on your investment objectives. Property selection remains critical.Could Rentvesting Affect First Home Buyer Benefits?
Yes, potentially. This is one of the questions you should investigate before deciding to rentvest. Some first-home buyer grants, concessions and government schemes have eligibility requirements relating to whether you’ve previously owned property and whether you occupy the property as your principal place of residence. Rules also differ between programs and can change over time. That means you shouldn’t assume that buying an investment property first will have no impact on your future eligibility. On the other hand, you also shouldn’t automatically dismiss rentvesting because you’re worried about losing a benefit. A grant or concession can be valuable, but it needs to be considered alongside the broader financial consequences of the strategy. The important question is: Would the long-term benefits of the investment strategy outweigh the benefits you may give up by no longer qualifying for a particular first-home buyer incentive? That requires looking at your individual circumstances rather than making a decision based on the grant alone.Could Rentvesting Make It Harder to Buy My Home Later?
It can. This is one of the most important considerations that prospective rentvesters need to understand. When you purchase an investment property, the associated loan becomes part of your overall financial position. Although lenders may take some rental income into account when assessing future borrowing capacity, they will also consider the investment loan, property expenses and your other financial commitments. Your future borrowing capacity may therefore not simply be: “My income has gone up, so now I can buy a more expensive home.” The investment loan needs to fit into the overall lending assessment. This is why the finance structure should be considered before purchasing the investment, particularly if you expect to buy your own home later.What Costs Should a Rentvester Consider?
Rent won’t always cover all the expenses and there can be costs involved that you haven’t thought of before. Owning an investment property can involve expenses such:- Loan repayments
- Property management fees
- Council and water charges
- Insurance
- Maintenance and repairs
- Body corporate or strata costs where applicable
- Vacancy periods
- Land tax where applicable
- Buying and selling costs
- Potential changes in interest rates
So, Is Rentvesting Actually Worth It?
It can be — for the right person and the right property strategy. Rentvesting may be worth considering if:- You want to live somewhere that is expensive to buy.
- You can comfortably afford an investment property.
- You want to enter the property market without buying your own home yet.
- You have a clear long-term property strategy.
- You understand the additional costs and risks.
- You have considered how the investment may affect future borrowing capacity.
- You’ve investigated how buying an investment property could affect first-home buyer benefits and schemes.
The Better Question to Ask
If you can afford to buy, don’t automatically assume that means you should purchase the first home you can afford. Instead, compare the alternatives. What happens if you buy the home you want? What happens if you buy an investment and continue renting? What happens to your borrowing capacity under each strategy? What government benefits could you gain or lose? Which option gives you the flexibility you want in the future? Those questions can lead to a much more useful conversation than simply asking whether buying is “better” than renting. For some people, buying their home will be the right answer. For others, continuing to rent while building an investment portfolio may make sense. And for some, neither option will be appropriate right now. The objective isn’t to make everyone a rentvester. It’s to make sure your property purchase fits the bigger picture.Key Takeaways
- You can be able to afford a property without needing to buy the property you live in.
- Rentvesting involves renting your preferred home while owning an investment property elsewhere.
- The strategy can suit buyers who prioritise lifestyle or location while wanting to enter the property market.
- Rentvesting is not automatically better than buying your own home.
- An investment property can affect your future borrowing capacity.
- First-home buyer grants, concessions and schemes need to be considered before purchasing an investment property.
- Investment property costs extend well beyond the mortgage repayment.
- Property selection and lending structure are important parts of the strategy.
- The right choice depends on your individual circumstances and long-term goals.
