Article

The pros and cons of rentvesting.

5 March 2024 Read time: 3 min

Author Charlotte Whelan

Expert Reviewer Rae Stagbouer

Heard about ‘rentvesting’ and think it might be a good way to enter the property market amidst high property prices without sacrificing your lifestyle? Well, like most things in life, there are upsides and downsides to keep in mind. Read on as we explore some of the pros and cons of rentvesting.

What is ‘rentvesting’?

Heard the term ‘rentvesting’?

In short, the concept of rentvesting means buying where you can afford and living where you love.

Those singing the praises of rentvesting say it gives you the opportunity to secure a property (often in regional or rural areas) whilst renting in urban areas that offer lifestyle benefits like convenient transportation, great hospitality options and access to quality education.

Like all financial strategies, there are benefits and drawbacks so be sure to consider both the pros and cons of rentvesting.

Pros of rentvesting.

Rentvesting can offer you the freedom to live in an area you desire, with lots of additional benefits. Some of the pros of rentvesting are as follows.

Live where you want.

Provided you can afford to service a mortgage whilst also paying rent, rentvesting can allow you to live where you want (not just where you can afford to buy). Through this lens, rentvesting can help you get a foot in the door, even whilst the property market is running hot.

Put Rental Income to Use.

Income from renting your rentvested property (yep, totally made up term) can be used to pay down the mortgage or help to offset your own rental costs.

Plan for the future.

Rentvesting can also help you set longer-term plans like a green-change, sea-change or a return to the city in motion. Not quite ready to make the move regionally? Rentvesting might be an option worth considering.

Get strategic.

Rentvesting can allow you to buy in areas with lower entry points, better growth potential or higher rental yields without leaving the area you know and love.

Potential for capital gains.

If your property increases in value, profits from its sale could go to another property, project or personal goal.

Cons of rentvesting.

Rentvesting does have some drawbacks and doesn’t offer the stability of living in your own home. Some of the cons of rentvesting to be aware of include:

You don’t own the property you live in.

This means you generally can’t customise your home to suit your wants and needs, i.e. hanging your favourite piece of art, installing air-con or re-painting.

Renting can often mean instability.

As a tenant yourself, you face the uncertainty of rent rises and the risk that your ‘home’ could be sold at any time.

Carrying the costs of home ownership AND rent.

As a landlord, ongoing repairs, maintenance and leasing agent fees add up. If rental income dips below the cost of ownership, you’ll need to make up the difference, as well as continue to pay your own rental costs which may also fluctuate.

Tax and missed incentives.

Whilst selling a primary residence is capital gains tax free, selling an investment property will attract CGT. You also forego access to the First Home Owners Grant and other property-related incentives. So it’s important to figure out what rentvesting means to your overall tax and financial position.

Get advice before making the plunge.

So there we have it, just some of the pros and cons of rentvesting.

Before deciding if rentvesting (or any other property or investment strategy) right for you, it’s important to carefully evaluate your financial goals and lifestyle preferences. There is no one-size-fits-all strategy and articles like these don’t consider your individual circumstances.

So, we always *always* recommend chatting to a financial adviser before making big decisions. And that’s where our team comes in. Get in touch!

Wonder if rentvesting is right for you?

Let's chat rentvesting