Rentvesting
Renting where you want to live while owning an investment property somewhere more affordable.
Rentvesting separates where you live from where you invest. You rent in a suburb you enjoy but could not afford to buy in, and buy in a cheaper market where the numbers work.
The tax treatment is materially different from owner-occupying. Interest and holding costs on the investment property are deductible, and depreciation is available, neither of which applies to a home you live in.
The trade-off is losing the main residence exemption on that property. Your investment is fully exposed to capital gains tax, and you are not building equity in the place you actually live.
Why the numbers can work
Renting a $750-a-week apartment near work while owning a $480,000 investment property elsewhere can cost less each month than servicing a $1.2 million mortgage on an equivalent home.
The bit people get wrong
Rentvesting works financially but carries real lifestyle risk. You remain a tenant, subject to rent increases and the possibility of being asked to leave, while your capital is committed somewhere you have no intention of living.
Common questions
Can I still use the First Home Owner Grant?
Most grants and stamp duty concessions require you to live in the property for a minimum period, so buying purely as an investment usually forfeits them. Rules vary by state.
Is rentvesting better than buying a home?
It can produce a better financial outcome, particularly in expensive cities, but it trades security of tenure for flexibility and tax efficiency. That trade is personal rather than purely mathematical.
Can I move into my investment property later?
Yes, and doing so starts a partial main residence exemption from that point. The earlier investment period remains subject to CGT on a proportional basis.
Run your own numbers