Rentvesting: what it is, who it suits, and the real risks to understand

Rentvesting is a strategy where someone rents the home they want to live in, while purchasing an investment property elsewhere that better suits their budget or long-term financial goals. It’s increasingly common among professionals and first-home buyers who want flexibility without missing out on property ownership.

The key benefits of rentvesting

1. Access to the property market sooner

For many buyers, particularly in capital cities, rentvesting allows them to buy something rather than waiting years to afford a home in their preferred suburb. In fast-moving markets, it can be extremely difficult to outsave rising property prices through cash savings alone. Rentvesting provides exposure to the market earlier, rather than attempting to chase prices that may continue to move faster than wages and savings.

2. Using leverage to accelerate progress

One of the biggest advantages of rentvesting is the ability to use borrowed funds to control a much larger asset than could be achieved through saving alone. By deploying the bank’s money alongside their own, buyers can benefit from growth on the full property value, not just their deposit. Over time, this leverage can significantly accelerate wealth creation and help fast-track future deposits for an ideal home or additional property purchases.

3. Lifestyle flexibility

Rentvesting suits people who want to live close to work, schools, or lifestyle hubs without taking on a large mortgage in a premium location. Renting can provide flexibility for career changes, family needs, or future relocations.

4. Potential tax advantages

Investment properties may allow owners to claim deductions on interest, depreciation, and expenses, which can help improve cash flow. While tax shouldn’t be the sole reason to invest, it can soften the cost of holding property in the early years.

5. Forced saving through ownership

Mortgage repayments can act as a form of disciplined saving. Over time, rentvestors may build equity that can later be used to upgrade into an owner-occupied home.

How rentvesting can help people save

When structured properly, rentvesting can be a stepping stone rather than a compromise.

Some buyers deliberately choose a lower-cost investment property with strong rental demand, allowing rental income to offset part of the mortgage while they continue renting. Combined with capital growth, this approach can help people build equity faster than saving cash alone, particularly in rising markets.

The main risks to be aware of

1. Cash-flow pressure

Rentvesting means paying both rent and a mortgage. If rental income drops, interest rates rise, or unexpected costs occur, cash flow can tighten quickly. This is why buffers and conservative borrowing are critical.

2. Market risk

Not all property markets perform the same. Buying purely to “get in” without understanding local fundamentals can result in limited growth or longer vacancy periods.

3. Lifestyle drift

Some rentvestors unintentionally stay renting longer than planned. Without a clear strategy, the original goal of upgrading into a home can drift further away over time.

4. Lending policy changes

Banks assess rentvestors differently from owner-occupiers. Borrowing capacity, shading of rental income, and future lending rules can impact the ability to upgrade later if not planned carefully.

Who rentvesting is best suited to

Rentvesting tends to suit:

• Professionals early in their careers with rising income potential

• Couples who value lifestyle and location flexibility

• Buyers who want market exposure while living where they choose

• Investors with a long-term mindset and financial discipline

It’s generally less suited to people with tight budgets, minimal savings buffers, or those uncomfortable with variability in cash flow.

Final expert insight

Rentvesting isn’t a one-size-fits-all solution. In capital city markets especially, it can be extremely difficult to save a deposit quickly enough without some exposure to growth along the way. When done with a clear plan, realistic numbers, and the right property choice, rentvesting can help people use leverage responsibly to build equity faster and move closer to their ideal home or next investment. The key is understanding that rentvesting is a strategy, not a shortcut — and it works best when aligned with long-term goals rather than short-term pressures.

Brett Sutton

Mortgage Expert