How rentvesting works
Instead of stretching to buy a home in the suburb you love, you keep renting there and buy an investment property somewhere more affordable, often with stronger rental returns. The tenant's rent helps pay the loan, and you build equity you can use later.
The upsides
- You get into the property market sooner, at a price you can afford
- You keep living where your work, family and lifestyle are
- Rent from the property helps cover the loan
- Some investment costs may be tax deductible. Your accountant can confirm
The trade-offs
- You pay rent and a mortgage. Your budget has to cover both, plus the costs of owning a rental property.
- Investment loans can cost more. Rates are often higher than for owner-occupied loans, and interest only is common.
- Capital gains tax. Unlike your own home, an investment property can be subject to capital gains tax when you sell.
- Less security of tenure. You're still renting, so your landlord's plans can affect yours.
The first home buyer traps
This is where rentvesting needs the most care, because most first home buyer support is for homes you live in:
- Stamp duty concessions. Queensland's first home concessions are for owner-occupiers, so an investment purchase generally pays full transfer duty.
- The 5% Deposit Scheme. It's for owner-occupied homes only, and buying an investment property first can affect whether you qualify later.
- The First Home Owner Grant. It's for a new home you live in. Owning an investment you've never lived in may not rule you out of the grant later, but the rules are specific, so check before you buy.
Before you buy an investment as your first property, I'll show you what support you'd be giving up and what it's worth.
Setting up the loan
Structure matters from day one: a separate investment loan, interest only or principal and interest, and somewhere for your savings to sit. See investment property loans and interest only loans.
Questions people ask
What is rentvesting?
Renting where you want to live while buying an investment property somewhere more affordable.
Is rentvesting a good idea?
It can be, if the numbers work and you understand the trade-offs, including the first home buyer support you may give up.
Can I get the First Home Owner Grant if I rentvest?
Not on the investment property, because the grant requires you to live in the home. Owning an investment you've never lived in may not stop you getting the grant later. Check the current rules first.
Can I use the 5% Deposit Scheme for an investment property?
No. The scheme is only for homes you'll live in.
