For a lot of Canberrans, the dream home is in a suburb they can’t quite afford to buy in, yet. Rentvesting is the strategy that’s quietly letting them get into the market anyway, without giving up where they want to live. Here’s how it works, and whether it might fit you.
What rentvesting actually is
Traditionally, your first property is the home you live in. Rentvesting flips that: you rent the home you live in, and buy an investment property elsewhere, typically somewhere more affordable than where you want to live.
You become a tenant and a property owner at the same time. You rent in the inner-city suburb or the location that suits your life, while your investment property, in a more affordable area, is rented out to someone else, with their rent helping to cover your loan.
Why people do it
Rentvesting solves a specific problem: wanting to live somewhere you can’t yet afford to buy. Instead of waiting years to save enough for your dream suburb, or compromising on where you live, you get onto the property ladder now, in a location that fits your budget.
The appeal:
- You start building equity sooner, rather than waiting to afford your ideal suburb
- You keep your lifestyle, living where you want, close to work, friends, or the lifestyle you value
- The rental income helps, your investment property’s tenant contributes to the loan
- Potential tax benefits, as an investment property, costs may be deductible (see negative gearing); when you’re ready, buying an investment property is where the finance side begins
For younger buyers, or anyone whose preferred location is out of reach, it’s a genuine third path between “buy where I can afford to live” and “keep renting and buy nothing.”
The honest trade-offs
Rentvesting isn’t a free lunch. The real considerations:
- You’re still a renter, with the insecurity that can bring (lease renewals, rent rises, landlords selling).
- You miss out on owner-occupier perks, notably first home buyer benefits that require you to live in the property. Buying an investment first can affect your eligibility for schemes like the stamp duty exemption, which typically require owner-occupation.
- You’re a landlord, with the responsibilities, costs, and occasional headaches that come with it.
- Capital gains tax, an investment property doesn’t get the main-residence CGT exemption, so tax applies when you sell.
That first-home-buyer point matters in the ACT especially, where the owner-occupier stamp duty exemption is valuable. Rentvesting can mean forgoing it, so the maths needs to weigh the benefit of buying now against the concessions you’d get by buying a home to live in.
Who rentvesting suits
Rentvesting tends to work best for:
- People whose preferred suburb is unaffordable but who don’t want to compromise on where they live
- Younger buyers wanting to start building equity without waiting years
- Those comfortable being a landlord and managing an investment
- People with a longer-term plan, perhaps to eventually buy where they live, using equity built through the investment
It suits less well those who highly value the security of owning their own home, or who’d benefit more from first-home-buyer owner-occupier concessions.
Wondering whether rentvesting stacks up for you? A 15-minute call weighs it against buying a home to live in, including the schemes you’d gain or give up, so you can choose with the full picture.
Book a 15-min call -> · 0461 117 777
Rentvesting vs buying a home to live in
The core trade-off:
- Buy a home to live in: security, owner-occupier concessions (like the ACT stamp duty exemption), main-residence CGT exemption, but you have to afford your chosen location.
- Rentvest: live where you want now, start building equity in an affordable area, rental income and tax benefits, but you’re a renter and landlord, and you may forgo first-home-buyer perks.
Neither is universally right. It comes down to your priorities: location and lifestyle now, or the security and concessions of owning your home.
The bottom line
Rentvesting is a legitimate strategy that lets you build property equity while living where you actually want to be. It suits people priced out of their preferred suburb who are comfortable being both a renter and a landlord. The main catch in the ACT is potentially forgoing valuable owner-occupier concessions, so the decision needs the full maths, not just the appeal of the idea.
To see whether it fits your situation, book a 15-minute call with Harbir.
Or call 0461 117 777 | Email info@creditstar.com
Frequently Asked Questions
Q1. What is rentvesting?
Ans. Renting the home you live in while buying an investment property somewhere more affordable. You get onto the property ladder without compromising on where you live.
Q2. Why do people rentvest?
Ans. To live in a suburb they can’t yet afford to buy in, while still building property equity elsewhere. It’s a middle path between buying where you can afford and not buying at all.
Q3. Does rentvesting affect first home buyer benefits?
Ans. It can. Many first-home-buyer concessions, including owner-occupier stamp duty exemptions, require you to live in the property. Buying an investment first may mean forgoing them.
Q4. Is rentvesting a good idea?
Ans. It can be, for people priced out of their preferred area who are comfortable being a renter and landlord. It’s less suited to those who value owning their own home or want owner-occupier concessions.
Q5. Do I pay capital gains tax when rentvesting?
Ans. Yes, on the investment property. Unlike your main residence, an investment property doesn’t get the CGT main-residence exemption, so tax applies on the gain when you sell.
Q6. Can the rental income cover my investment loan?
Ans. Often it covers a large portion, but not always all of it. Any shortfall (a negatively geared position) may be partly offset by tax deductions, but you’ll typically fund some of it yourself.
Q7. Is rentvesting cheaper than buying a home?
Ans. Not necessarily cheaper, but it lets you buy in a more affordable area while living where you want. The total cost depends on rents, the investment loan, and tax, worth modelling before committing.
Q8. Can I rentvest as a first home buyer?
Ans. Yes, but weigh it carefully. As a first home buyer, you may be giving up owner-occupier concessions that only apply if you live in the property you buy.
Q9. What are the risks of rentvesting?
Ans. You remain a renter (with lease insecurity), take on landlord responsibilities, face CGT on the investment, and may forgo first-home-buyer perks. The strategy relies on the investment performing well.
Q10. Can I switch from rentvesting to owning my home later?
Ans. Yes, many rentvestors plan to eventually buy where they live, using equity built in the investment property. It can be a stepping stone rather than a permanent arrangement.
This guide is general information only and doesn’t take into account your personal situation, and it isn’t tax or financial advice. Tax treatment depends on your circumstances, consult a registered tax agent or financial adviser. For your loan, book a call with Harbir Hundal, Credit Representative 506564 of BLSSA Pty Ltd ACN 117 651 760, Australian Credit Licence 391237.
