In the face of soaring property prices in Australia’s major cities, a growing number of savvy Aussies are turning to rentvesting—a strategy that lets you live where you want while investing where you can afford. It’s a game-changer for those who refuse to compromise on lifestyle but are determined to build wealth through real estate.
What Exactly is Rentvesting?
Rentvesting is like the cool cousin of traditional homeownership. Instead of stretching your budget to buy a home in your dream location, you rent there instead and invest in a more affordable area. This way, you get to enjoy the lifestyle you love while your investment property quietly does the heavy lifting in the background.
Why Rentvesting Makes Perfect Sense
Picture this: you’re eyeing that swanky apartment in Sydney’s Bondi Beach where buying could cost you a small fortune. Instead of coughing up $3,250 a month in mortgage repayments, you could rent the same place for $1,750, and suddenly you’ve got an extra $1,500 burning a hole in your pocket each month. What do you do with that extra cash? You invest it in a property in a more affordable suburb, of course! First Homebuyer: Saving Strategies
The Perks of Rentvesting
- Live Where You Want: Fancy living near the beach or in a buzzing urban neighborhood? Go ahead—rentvesting lets you pick your ideal spot without breaking the bank.
- Grow Your Wealth: Use the savings from renting to invest in property, potentially in a growing suburb. It’s like having your money work double shifts for you. Co-Living: A New Trend In Rental Investment Housing
- No Maintenance Woes: As a renter, when the dishwasher breaks down, it’s your landlord’s problem, not yours. Sit back, relax, and enjoy the perks of “all care, no responsibility.”
- Tax Advantages: Your investment property isn’t just adding to your portfolio—it’s also giving you some sweet tax deductions on things like interest, maintenance, and depreciation.
- Go with the Flow: Rentvesting gives you the flexibility to move as your life changes. Want to try living in a new city or just change neighborhoods? No worries—you’re not tied down by a mortgage.
The Trade-Offs
- Capital Gains Tax: Unfortunately, unlike the home you live in, you’ll have to pay capital gains tax when you sell your investment property. But hey, you can’t win ‘em all!
- Landlord Rules: As a renter, your landlord calls some of the shots. It’s a small price to pay for living where you want, but it can mean less control over your space.
- Going Against the Grain: Rentvesting might raise a few eyebrows among those who believe in the “Aussie dream” of owning your home. But isn’t it fun to be a trendsetter?
Let’s see it in action:
Imagine Matt, a young engineer, dreaming of living in the hippest part of town. Buying there would break the bank, but rentvesting allows him to rent a cool apartment with friends while snagging an investment property in the suburbs. The rental income helps offset his rent, and over time, his investment grows in value.
Here’s a breakdown of Matt’s situation:
| Category | Buy-to-Live | Rentvesting |
| Gross wages | $75,000 | $75,000 |
| Living costs | $23,000 | $23,000 |
| Purchasing power | $495,000 | $570,000 |
| Buying costs | $17,015 | $45,420 |
| Mortgage | $414,608 | $517,782 |
| Surplus cash | $2,593 | $2,542 |
| After-purchase surplus cash | $2,199 | $9,809 |
| After 10 years surplus cash | $4,700 | $9,750 |
| After 20 years surplus cash | $16,850 | $17,900 |
| Savings in offset account | $122,500 | $101,800 |
| Net mortgage debt | $40,200 | None |
| Property value | $1,587,550 | $1,828,050 |
| Net worth | $1,547,350 | $1,929,850 |
As you can see, rentvesting can be a lucrative strategy, especially in the long run.
Is Rentvesting for You?
Rentvesting isn’t just a clever compromise—it’s a strategy that lets you enjoy life now while securing your financial future. Perfect for young professionals and those with higher incomes, rentvesting helps you make the most of your money without giving up your lifestyle.
Of course, everyone’s situation is different, so it’s wise to get some personalized financial advice before diving in. But if you’re ready to shake things up and make your money work harder, rentvesting might just be the way to go in the Australian real estate market. After all, who doesn’t want to have their avo toast and eat it too?