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Navigating The Rentvesting Phenomenon


While the very term rentvesting may seem like an oxymoron, it’s a growing trend across Australia’s real estate market – so exactly how does the concept work?

The big attraction of buying your own home is just that – it’s yours, once you’ve paid back the banks of course. Apart from having somewhere to live, the quest for home ownership is also about having a long term investment strategy. If we’re looking at it from the viewpoint of decades instead of months, generally house prices do rise, and so does the value of your investment.

Buying your first property is also one of the first steps of building wealth, as the equity in the home will usually allow you the opportunity to access further loans if that’s what’s on your radar, such as shares, a managed fund, or even a second investment property – but entering the market as a first home buyer isn’t always easy.

However, many buyers also make the mistake of approaching their first home purchase with rose coloured glasses. In contrast, the reality is this – your first home does not have to be your forever home, and the concept of rentvesting is pushing back against this often traditional yet idealistic view.

The Concept Of Rentvesting Explained

As home prices continue to soar in metropolitan areas and inner city hubs, purchasing a property in these postcodes is simply out of reach for many people, particularly Millennials and the younger generations. However, it’s these same generations who are particularly fond of the lifestyle that living in the big smoke brings. Instead of saving for quite literally years, they’ve opted to take a different approach as a means to have the best of both worlds when it comes to the age-old conundrum of renting vs buying. 

In a nutshell, rentvesting is a home ownership strategy in which consumers rent a property to live in that’s in line with their lifestyle, but they own an investment property that’s in line with their budget. While they are technically home owners, their abode is not something – or somewhere – that they would like to live in themselves. 

As an example, let’s assume that buying your dream home in your desired location means a monthly mortgage repayment of $4,000. However, if you instead rent a home in the same vicinity, your rental payments could be as low as $2,200 a month. The difference per month leaves you with $1,800, which you could then in turn invest elsewhere.

An increasingly common example of using these funds is via rentvesting, where consumers are purchasing a property in a cheaper postcode, and using this spare cash to pay off a mortgage. When it comes to navigating an increasingly complex real estate market – if that’s not having your cake and eating it too, we aren’t quite sure what is.

One of the primary drawcards of the rentvesting phenomenon in Australia is that it allows consumers to break into the property market sooner with a smaller deposit, as opposed to waiting several years until you are able to afford your dream home. For younger generations, this is becoming increasingly attractive, as the cost of living continues to rise, which in turn makes saving up for a house deposit increasingly difficult. While this concept allows consumers to get their foot onto the property ladder, it doesn’t mean sacrificing the lifestyle preferences or moving to a region that isn’t suited to your job or personal taste.

While buying an investment property before purchasing a home to live in can seem counterintuitive to many people, it’s a growing trend seen in Australian real estate as a means to alleviate pressure linked to increasing house prices, while still capitalising on lower rents seen across urban centres. However, it’s important to ensure that you’re financially able to cover both costs, which is when the help of a mortgage broker can prove to be invaluable when it comes to navigating your options.

Get The Right Advice The First Time

With a background in banking, finance, business development and project management, there’s no better advocate to have on your team than Nikki Berzin. As a fully qualified mortgage broker and director of Cherry Lending & Finance, Nikki is passionate about all things finance, and empowering her clients with the tools to hit their property goals is what she does best.

If you’re looking to get into your first home, purchase an investment property or even want to look at your options for refinancing, the first step is starting the conversation. Get in touch with Nikki today, or call her directly on 0427 374 155 to bring your mortgage dreams to life.

Disclaimer: Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.  Subject to lenders terms and conditions, fees and charges and eligibility apply.

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