Rentvesting – own property while you rent

Can't afford to buy the home you want to live in? Rentvesting could be your answer: you keep renting where you want to live, and buy an affordable investment property instead.

Thanks to skyrocketing property prices in many parts of the country, the home ownership dream is starting to take a different shape for some buyers: rentvesting.

Instead of buying the property you want, rentvesters keep renting in an area you like living in. Then you buy a more affordable investment property somewhere else. You may never live there, but you own a property and you (and your tenants) are paying it off. For some Australians, it's your best shot at entering the market.

What is rentvesting?

Rentvesting is an investment strategy for would-be home owners who can't afford their dream home yet.

Say you want to buy a 2-bedroom home in Sydney’s inner west, but the sale prices in the area mean these homes are out of your reach. By following the rentvesting strategy you'd rent the kind of property you want to live in.

Then, you purchase a more affordable property in a suburb where property prices are cheaper. The property you buy is rented out, so while you rent your home, someone else's rent is helping cover the mortgage in the property you own. Over time you slowly pay down the mortgage, and you can eventually sell it and use the gains to buy a home you want to live in; or keep renting, and one day when your investment is paid off, enjoy the income.

Rebecca's headshot
Expert insight

"This is so sensible now when affordability is as tough as it is. Buying higher-performing investments and renting where you want to live makes sense if you have a real growth attitude and want to accumulate property, or, simply live somewhere that isn't affordable to buy in."

Mortgage broker and founder, Two Red Shoes

Watch: How rentvesting works

Pros and cons of rentvesting

Pros

  • Get into the property market sooner. Rentvesting allows you to break into the property market with a smaller deposit, rather than saving a bigger deposit over several years.
  • Build wealth. Rentvesting allows you to start building your investment property portfolio, which can be used to generate wealth for you and your family in the future.
  • Save for your dream home. Owning an investment property allows you to save to buy your dream home.
  • Flexibility. When you’re renting, you can more easily upgrade or downgrade your home if your circumstances change, like if you lose your job or get a promotion.
  • Move around. If you’re not ready to put down permanent roots in a particular area, rentvesting gives you the freedom to move around and even travel the world if you wish.
  • Tax benefits. You can claim interest payments on your investment property loan as a tax deduction.
  • Choose where to invest. Where you want to live and the best place to buy an investment property often won’t be the same, so rentvesting allows you to be ruthless when it comes to choosing an investment.

Cons

  • Buying an investment first. Buying an investment property before purchasing your own home can seem counter-intuitive to many people. Investment loans tend to have higher interest rates too.
  • You lose first home buyer benefits. Australian governments have some support policies for first home buyers. This includes grants and stamp duty discounts. Investors don't get these benefits, and if your first home is an investment you won't qualify for first home buyer support later when you do buy your dream home.
  • Dead money. The old adage that "rent money is dead money" may be a deterrent for some people considering this approach.
  • You don’t own your home. As much as you may love your rental property, you don’t own it. This can be especially difficult if you form an emotional connection to a house but then the landlord wants you to move out.
  • You can’t make it your own. Although a rental property might be vastly improved by a renovation project or simply a fresh coat of paint, it’s not yours to tinker with.
Rasti Vaibhav's headshot
Expert insight

"Affordability is poor in many markets that have seen huge surges in growth in a short period. However, there are others where growth has been consistent and still trending higher. Look to identify suburbs where houses are still affordable relative to average household incomes."

Rasti Vaibhav
Property strategist & author

What is the 6 year rule for rentvesting?

This relates to capital gains tax (CGT). When you own an investment property, you will be required to pay CGT when you eventually sell it.

CGT is calculated by taking the gain you make and adding it to your taxable income for the year. For instance, if you buy an investment home for $500,000 and sell it for $800,000, your gain is $300,000. This $300,000 will be added to your taxable income in the year you sell it and you'll pay tax on it at the appropriate rate.

Under current tax laws, if you own the property for more than 12 months, you'll get a 50% discount on tax (ie you only have to declare a gain to $150,000).

If you buy a home and live in it to establish it as your principal place of residence, you can then move out and rent another home and rent out your former home to produce income. When you do this, you can choose to treat it as your main residence with the ATO for up to 6 years after you stop living in it. This is sometimes called the '6-year rule'. Effectively, this gives you a 6-year period where you don't have to declare any capital growth.

Is it better to rentvest or buy?

On paper, renting often works out cheaper in the long run than buying. This is because home owners pay a lot of money in interest compared to rent. A quick example calculation of renting versus buying costs found that renters end up hundreds of thousands of dollars better off over the 30 years it would take to pay off a mortgage. Not to mention maintenance and other costs of owning property.

But this doesn't factor in the value of the asset. Yes, home owners might spend several hundred thousands dollars more over time. But they end up with an asset that is worth 7-figures.

Rentvestors get the best of both worlds in some respects. This is because you get to build equity in a property while avoiding the heavy cost of a mortgage on your dream home. Your maintenance costs on your investment, and your mortgage interest, are all tax-deductible too.

But rentvestors also end up renting and paying off a mortgage for someone else. You have to deal with all the problems renters face, such as unresponsive landlords and the possibility of having to move every few years. This can be frustrating for many people.

How to decide on the right approach for you?

Before you choose to buy a home or rentvest, make sure you can afford to rent and have a mortgage. Just because an investment property is cheaper than your dream home doesn’t necessarily mean that you can afford it, and just because renting feels like throwing away money doesn’t automatically mean you should mortgage yourself to the hilt.

Use a mortgage repayment calculator and break down your costs. Before deciding on either approach, you could also benefit greatly by seeking out expert advice from a mortgage broker.

Compare investment loan rates

{"visibility":"visibilityTable","ctaLabel":"Calculate","tableCode":"SAMPLE_COMPARISON_V2_TEMPLATE","nicheCode":"AUFHL","fields":[{"name":"LOAN_AMOUNT","value":"150000","options":"","label":"Borrowing amount","suffix":"$","useSuffixAsPrefix":true,"useDropDownOption":false,"tooltip":""},{"name":"PERIOD","value":"30","options":"","label":"Period","suffix":"years","useSuffixAsPrefix":false,"useDropDownOption":false,"tooltip":""}]}
1 - 20 of 26
Name Interest Rate p.a. Comparison Rate p.a. Fees Monthly Payment
Macquarie Bank logo
Principal & Interest40% min. depositInvestmentOffset account
Macquarie Bank logo
Principal & Interest40% min. depositInvestmentOffset account
Go to site
Product NameMacquarie Bank Offset Home Loan Package
Interest Rate Typevariable rate
Repayment Type Principal & Interest
Interest Rate p.a.6.34%
Comp. Rate p.a.6.59%
Minimum Loan Amount$150,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 60%
Loan Redraw FacilityYes
Offset AccountYes
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
6.34%
Comparison Rate
6.59%
Fees
Application: $0
Ongoing: $248 p.a.
Monthly Payment
$934
Go to site
Macquarie Bank logo
Principal & Interest40% min. depositInvestment
Macquarie Bank logo
Principal & Interest40% min. depositInvestment
Go to site
Product NameMacquarie Bank Basic Home Loan
Interest Rate Typevariable rate
Repayment Type Principal & Interest
Interest Rate p.a.6.34%
Comp. Rate p.a.6.36%
Minimum Loan Amount$150,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 60%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionNo
Loan PortableNo
Extra Repayments Yes
Interest Rate
6.34%
Comparison Rate
6.36%
Fees
Application: $0
Ongoing: $0 p.a.
Monthly Payment
$934
Go to site
Macquarie Bank logo
Principal & Interest30% min. depositInvestmentOffset account
Macquarie Bank logo
Principal & Interest30% min. depositInvestmentOffset account
Go to site
Product NameMacquarie Bank Offset Home Loan Package
Interest Rate Typevariable rate
Repayment Type Principal & Interest
Interest Rate p.a.6.34%
Comp. Rate p.a.6.59%
Minimum Loan Amount$150,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 70%
Loan Redraw FacilityYes
Offset AccountYes
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
6.34%
Comparison Rate
6.59%
Fees
Application: $0
Ongoing: $248 p.a.
Monthly Payment
$934
Go to site
Macquarie Bank logo
Principal & Interest 3Y Fixed20% min. depositInvestment
Macquarie Bank logo
Principal & Interest 3Y Fixed20% min. depositInvestment
Go to site
Product NameMacquarie Bank Basic Fixed Home Loan
Interest Rate Typefixed rate
Repayment Type Principal & Interest
Interest Rate p.a.5.95%
Comp. Rate p.a.6.33%
Minimum Loan Amount$150,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityNo
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
5.95%
Comparison Rate
6.33%
Fees
Application: $0
Ongoing: $0 p.a.
Monthly Payment
$896
Go to site
Macquarie Bank logo
Principal & Interest20% min. depositInvestment
Macquarie Bank logo
Principal & Interest20% min. depositInvestment
Go to site
Product NameMacquarie Bank Basic Home Loan
Interest Rate Typevariable rate
Repayment Type Principal & Interest
Interest Rate p.a.6.45%
Comp. Rate p.a.6.48%
Minimum Loan Amount$150,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionNo
Loan PortableNo
Extra Repayments Yes
Interest Rate
6.45%
Comparison Rate
6.48%
Fees
Application: $0
Ongoing: $0 p.a.
Monthly Payment
$945
Go to site
Macquarie Bank logo
Principal & Interest20% min. depositInvestmentOffset account
Macquarie Bank logo
Principal & Interest20% min. depositInvestmentOffset account
Go to site
Product NameMacquarie Bank Offset Home Loan Package
Interest Rate Typevariable rate
Repayment Type Principal & Interest
Interest Rate p.a.6.45%
Comp. Rate p.a.6.70%
Minimum Loan Amount$150,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountYes
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
6.45%
Comparison Rate
6.70%
Fees
Application: $0
Ongoing: $248 p.a.
Monthly Payment
$945
Go to site
Westpac logo
Interest only20% min. depositInvestment
Westpac logo
Interest only20% min. depositInvestment
Product NameWestpac Flexi First Option Home Loan
Interest Rate TypeVariable rate
Repayment Type Interest Only
Interest Rate p.a.7.34%
Comp. Rate p.a.7.66%
Minimum Loan Amount$25,000
Maximum Loan Amount $20,000,000
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionNo
Loan PortableYes
Extra Repayments Yes
Interest Rate
7.34%
Comparison Rate
7.66%
Fees
Application: $0
Ongoing: $0 per month
Monthly Payment
$1,034
ANZ logo
Interest only 2Y Fixed10% min. depositInvestment
ANZ logo
Interest only 2Y Fixed10% min. depositInvestment
Product NameANZ Fixed Rate Home Loan
Interest Rate TypeFixed rate
Repayment Type Interest Only
Interest Rate p.a.6.49%
Comp. Rate p.a.7.72%
Minimum Loan Amount$20,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 90%
Loan Redraw FacilityNo
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
6.49%
Comparison Rate
7.72%
Fees
Application: $0
Ongoing: $10 per month
Monthly Payment
$948
Aussie logo
Interest only 3Y Fixed20% min. depositInvestmentOffset account
Aussie logo
Interest only 3Y Fixed20% min. depositInvestmentOffset account
Product NameAussie Elevate Fixed Home Loan
Interest Rate Typefixed rate
Repayment Type Interest Only
Interest Rate p.a.6.64%
Comp. Rate p.a.6.63%
Minimum Loan Amount$10,000
Maximum Loan Amount $5,000,000
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountYes
Split Loan FacilityYes
Fixed Interest Option
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.64%
Comparison Rate
6.63%
Fees
Application: $498
Ongoing: $0 per month
Monthly Payment
$963
Contact Broker
ING logo
Principal & Interest 4Y Fixed5% min. depositInvestment
ING logo
Principal & Interest 4Y Fixed5% min. depositInvestment
Product NameING Fixed Rate Home Loan
Interest Rate Typefixed rate
Repayment Type Principal & Interest
Interest Rate p.a.5.89%
Comp. Rate p.a.6.17%
Minimum Loan Amount$50,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 95%
Loan Redraw FacilityNo
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableYes
Extra Repayments Yes
Interest Rate
5.89%
Comparison Rate
6.17%
Fees
Application: $499
Ongoing: $0 p.a.
Monthly Payment
$890
Contact Broker
ANZ logo
Principal & Interest 3Y Fixed20% min. depositInvestment
ANZ logo
Principal & Interest 3Y Fixed20% min. depositInvestment
Product NameANZ Fixed Rate Home Loan
Interest Rate TypeFixed rate
Repayment Type Principal & Interest
Interest Rate p.a.5.94%
Comp. Rate p.a.7.28%
Minimum Loan Amount$20,000
Maximum Loan Amount $10,000,000
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityNo
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
5.94%
Comparison Rate
7.28%
Fees
Application: $0
Ongoing: $10 per month
Monthly Payment
$895
Bank of Melbourne logo
Principal & Interest 2Y Fixed30% min. depositInvestment
Bank of Melbourne logo
Principal & Interest 2Y Fixed30% min. depositInvestment
Product NameBank of Melbourne Fixed Rate Home Loan with Advantage Package
Interest Rate Typefixed rate
Repayment Type Principal & Interest
Interest Rate p.a.5.99%
Comp. Rate p.a.7.89%
Minimum Loan Amount$150,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 70%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableYes
Extra Repayments Yes
Interest Rate
5.99%
Comparison Rate
7.89%
Fees
Application: $0
Ongoing: $395 p.a.
Monthly Payment
$900
Contact Broker
ME logo
Principal & Interest 3Y Fixed20% min. depositInvestment
ME logo
Principal & Interest 3Y Fixed20% min. depositInvestment
Product NameME Flexible Home Loan Fixed with Members Package
Interest Rate Typefixed rate
Repayment Type Principal & Interest
Interest Rate p.a.5.89%
Comp. Rate p.a.6.74%
Minimum Loan Amount$40,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableNo
Extra Repayments Yes
Interest Rate
5.89%
Comparison Rate
6.74%
Fees
Application: $0
Ongoing: $395 p.a.
Monthly Payment
$890
Contact Broker
St.George Bank logo
Principal & Interest 4Y Fixed20% min. depositInvestment
St.George Bank logo
Principal & Interest 4Y Fixed20% min. depositInvestment
Product NameSt.George Fixed Rate Home Loan with Advantage Package
Interest Rate Typefixed rate
Repayment Type Principal & Interest
Interest Rate p.a.6.19%
Comp. Rate p.a.7.67%
Minimum Loan Amount$150,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.19%
Comparison Rate
7.67%
Fees
Application: $0
Ongoing: $395 p.a.
Monthly Payment
$919
Contact Broker
BankSA logo
Principal & Interest 4Y Fixed20% min. depositInvestment
BankSA logo
Principal & Interest 4Y Fixed20% min. depositInvestment
Product NameBankSA Fixed Rate Home Loan with Advantage Package
Interest Rate Typefixed rate
Repayment Type Principal & Interest
Interest Rate p.a.6.19%
Comp. Rate p.a.7.68%
Minimum Loan Amount$150,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionYes
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.19%
Comparison Rate
7.68%
Fees
Application: $0
Ongoing: $395 p.a.
Monthly Payment
$919
Contact Broker
G&C Mutual Bank logo
Finder Award
Interest only20% min. depositInvestmentOffset account
G&C Mutual Bank logo
Finder AwardInterest only20% min. depositInvestmentOffset account
Product NameG&C Mutual Bank Momentum Home Loan
Interest Rate Typevariable rate
Repayment Type Interest Only
Interest Rate p.a.6.40%
Comp. Rate p.a.6.42%
Minimum Loan Amount$100,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountYes
Split Loan FacilityNo
Fixed Interest OptionNo
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.40%
Comparison Rate
6.42%
Fees
Application: $0
Ongoing: $0 p.a.
Monthly Payment
$940
Greater Bank logo
Interest only10% min. depositInvestment
Greater Bank logo
Interest only10% min. depositInvestment
Product NameGreater Bank Great Rate Home Loan
Interest Rate Typevariable rate
Repayment Type Interest Only
Interest Rate p.a.6.34%
Comp. Rate p.a.6.35%
Minimum Loan Amount$0
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 90%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionNo
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.34%
Comparison Rate
6.35%
Fees
Application: $0
Ongoing: $0 p.a.
Monthly Payment
$934
Hume Bank logo
Interest only20% min. depositInvestment
Hume Bank logo
Interest only20% min. depositInvestment
Product NameHume Bank liteBlue Variable Home Loan
Interest Rate Typevariable rate
Repayment Type Interest Only
Interest Rate p.a.6.44%
Comp. Rate p.a.6.45%
Minimum Loan Amount
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 80%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityNo
Fixed Interest Option
Loan Portable
Extra Repayments Yes
Interest Rate
6.44%
Comparison Rate
6.45%
Fees
Application: $199
Ongoing: $0 per month
Monthly Payment
$944
Contact Broker
G&C Mutual Bank logo
Interest only10% min. depositInvestmentOffset account
G&C Mutual Bank logo
Interest only10% min. depositInvestmentOffset account
Product NameG&C Mutual Bank Momentum Home Loan
Interest Rate Typevariable rate
Repayment Type Interest Only
Interest Rate p.a.6.50%
Comp. Rate p.a.6.52%
Minimum Loan Amount$100,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 90%
Loan Redraw FacilityYes
Offset AccountYes
Split Loan FacilityNo
Fixed Interest OptionNo
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.50%
Comparison Rate
6.52%
Fees
Application: $0
Ongoing: $0 p.a.
Monthly Payment
$949
Bank Australia logo
Interest only30% min. depositInvestment
Bank Australia logo
Interest only30% min. depositInvestment
Product NameBank Australia Basic Variable Home Loan
Interest Rate Typevariable rate
Repayment Type Interest Only
Interest Rate p.a.6.54%
Comp. Rate p.a.6.47%
Minimum Loan Amount$10,000
Maximum Loan Amount N/A
Maximum Loan Term30 years
Maximum LVR 70%
Loan Redraw FacilityYes
Offset AccountNo
Split Loan FacilityYes
Fixed Interest OptionNo
Loan PortableYes
Extra Repayments Yes
Interest Rate
6.54%
Comparison Rate
6.47%
Fees
Application: $595
Ongoing: $0 p.a.
Monthly Payment
$953
Contact Broker
loading
Showing 20 of 26 results
Richard Whitten's headshot
Editor

Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio

Richard's expertise
Richard has written 558 Finder guides across topics including:
  • Home loans
  • Property
  • Personal finance
  • Money-saving tips

More guides on Finder

Ask a question

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms Of Service and Finder Group Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

4 Responses

    Default Gravatar
    SofiaApril 11, 2022

    If you rentvest to start, and later move to your investment property (1 year later), what are the CGT implications when you decide to sell?

      AvatarFinder
      RichardApril 13, 2022Finder

      Hi Sofia,

      In cases where the rental property becomes the main residence, you may qualify for a CGT exemption if you live there for at least 12 months before selling.

      I hope this helps.

      Cheers,
      Richard

    Default Gravatar
    DsalApril 4, 2017

    If I buy a property, rent it out for a while whilst renting another property myself, then later move in to my property, what are the tax implications? Will I be subject to CGT for the investment period of the owned property? How is it calculated if I don’t sell until a number of years later? Anything else I should consider?

      AvatarFinder
      MayApril 4, 2017Finder

      Hi Dsal,

      Thank you for your question and for contacting finder.com.au – we are a financial comparison website and general information service, we are not mortgage specialists so can only offer general advice.

      Basically, in your case, the CGT you’ll pay will be worked out by comparing the number of days you lived in the property to the number of days you rented the property. You’ll also be partially exempt from capital gains tax. You can find more details about CGT on our guide to selling properties and capital gains tax.

      Cheers,
      May

Go to site
Quickly see top rates and loans that suit you