Rentvesting: A Strategy Worth Understanding

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2nd April 2026

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You don't have to buy where you live.

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It sounds obvious when you say it out loud, but it's a point a lot of people miss - especially first home buyers who've been told their whole lives that the goal is to "get on the ladder" by buying a place to live in. The truth is, the ladder doesn't care which rung you step onto first. It just cares that you're on it.

That's the core idea behind rentvesting: you rent the home you want to live in, and you buy an investment property somewhere you can actually afford.

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Why people are doing this

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Melbourne's a good example. You might love living in Fitzroy or Brighton, but buying there as a first step might be out of reach or it might stretch your borrowing so thin that you're house-rich and cash-poor for years.

Rentvesting flips the equation. Instead of compromising on where you live or what you can afford, you separate the two decisions. You rent a place that suits your lifestyle - close to work, close to friends, the right fit for now - and you buy a property in a location where the numbers actually work. That might be an outer suburb, a regional town, or even interstate.

The goal isn't to rent forever. It's to get into the property market sooner, start building equity, and let a tenant help cover the mortgage while you keep living the way you want to.

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How it works in practice

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Let's say you're earning $110,000 a year and renting an apartment in Richmond for $520 a week. You've saved $110,000. Buying in Richmond would be tough - median prices would push you well past what you can comfortably service.

But a two-bedroom unit in a growth corridor - say Geelong or parts of outer Melbourne - might sit around $500,000 to $550,000. On a $550,000 purchase, your upfront costs look something like this: a deposit of around $65,000, stamp duty of roughly $28,000 (no first home concessions on an investment purchase), and around $2,000 in legal and settlement costs. That's approximately $95,000 in cash to complete - leaving you with a buffer of around $15,000 from your savings. The higher deposit accounts for lender's mortgage insurance being capitalised onto the loan, while keeping the total funded amount within the lender's 90% LVR cap for investment lending.

A tenant pays rent that covers a good portion of the mortgage, and you keep living where you want.

You're not waiting. You're in the market. You're building equity. And you haven't sacrificed your lifestyle to do it.

 

The lending side

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This is where it gets practical, and where a lot of people get tripped up.

Lenders will assess your ability to service the investment loan, but they'll also factor in your rent as a living expense. That cuts both ways - you get the benefit of expected rental income from the investment property, but you're also carrying a personal rent cost that reduces your borrowing power.

Most lenders will shade the expected rental income - typically using around 80% of the gross rent in their serviceability calculations. So if the property is expected to rent for $400 a week, the lender might only count $320 of that. Meanwhile, your own rent is counted in full as an expense.

This means your borrowing capacity on a rentvesting strategy can be lower than if you were buying a home to live in. It's not a dealbreaker, but it's something to plan around and it's one of the reasons it's worth talking to a broker early, before you start shopping.

 

Tax considerations

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Here's where rentvesting gets interesting and where you need to be careful.

Because you're buying an investment property, you can generally claim tax deductions on costs like loan interest, property management fees, maintenance, depreciation, and council rates. If the property is negatively geared  (meaning the costs exceed the rental income)  the shortfall can usually be offset against your taxable income.

That's a meaningful advantage compared to buying a home to live in, where none of those deductions apply.

But there's a trade-off. As a rentvestor, your investment property won't qualify for the main residence capital gains tax (CGT) exemption. When you eventually sell, you'll likely pay CGT on the gain, though holding for more than 12 months gives you access to the 50% CGT discount.

This isn't a reason not to do it. It's a reason to go in with your eyes open and get proper tax advice. A good accountant will help you model the numbers so you know what you're working with.

 

Who it suits

 

Rentvesting isn't for everyone, but it tends to work well for a particular kind of borrower:

• You're renting somewhere you enjoy and aren't ready to compromise on location.

• You've got a deposit saved but it's not enough for the suburb you'd want to buy in.

• You're comfortable with the idea of being a landlord (or having a property manager handle it).

• You understand that the strategy is a stepping stone and not a permanent arrangement.

• You're disciplined enough to keep saving and not treat the arrangement as a reason to slow down.

It's less suited to people who really want the security of owning their own home right now, or who'd find it stressful managing a property they don't live in. That's a legitimate preference, and there's nothing wrong with it.

 

The risks worth knowing about

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No strategy is without risk, and rentvesting has a few worth flagging.

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Vacancy: If your investment property sits empty for a few weeks between tenants, you're covering the full mortgage and your rent at the same time. You need a buffer for that.

Interest rate movement. If rates rise, your repayments go up but your rent as a tenant might also increase. You can get squeezed from both sides.

 

Market risk: The property you buy might not grow the way you expect. Location selection matters. Don't buy somewhere just because it's cheap.

 

Lifestyle creep: It's easy to fall into the trap of spending what you're "saving" by not owning your own home. The whole point of rentvesting is to build wealth and that only works if you stay disciplined.

 

Where to start

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If rentvesting sounds like it could work for you, the first step is understanding your borrowing position. What can you actually afford? What does your serviceability look like with rent as an expense and rental income factored in? Which lenders are the best fit for your situation?

That's a conversation worth having with a broker who understands the strategy - not just the theory, but the lending detail underneath it.

If you'd like to talk it through, feel free to get in touch.