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For many Australians, the traditional path into home ownership has quietly moved out of reach. Property prices in major cities, including Sydney, Melbourne and Brisbane, have climbed well beyond what many first home buyers can reasonably afford, and the gap between where people want to live and where they can afford to buy keeps widening.
That tension is pushing a growing number of buyers toward a different approach: rentvesting.
The strategy involves purchasing an investment property in a more affordable location while continuing to rent where you want to live.
We’ll walk you through how that works in practice, what the potential advantages and risks are, and what you should think about before deciding whether it makes sense for your situation.
What is rentvesting?
Rentvesting is a property strategy where you buy a residential investment property, usually in a location that's more affordable, while continuing to rent the home you live in. The property you own and the property you live in are two different things, which is what separates it from traditional home buying.
Rentvesting separates the financial question (where should I invest?) from the lifestyle question (where do I want to live?). Those two questions don't need to have the same answer. You can choose where to buy based on what your deposit and borrowing power can reach, and you can choose where to rent based on your job, your community, and the life you've built.
It’s easy to see why so many younger Australians find it appealing.
Rentvesting vs buying your own home first
There's no universally right choice between rentvesting and buying an owner-occupied home first.
Both paths can involve trade-offs, and the right choice for you depends heavily on various factors, including your financial situation, where you want to live, and what matters to you in the years ahead.
The most obvious difference is lifestyle. When you buy your own home, you own the place you live in. There's real emotional and practical security in that, even if it means buying somewhere that isn't your first choice of suburb.
Rentvesting may give you more choices about where you live, but it also means you're still a tenant, without the sense of permanence that can come with home ownership.
On the financial side, buying your own home may give you access to stamp duty concessions and first home buyer grants that aren't available when your first purchase is an investment property. On the other hand, rentvesting means you can potentially access rental income to help cover property-related costs, and as an investor you may be able to claim tax deductions that aren't available to owner-occupiers.
Weighing all of this up for your specific situation is what financial advisers and tools are for. IMB's home loan calculators let you run different scenarios side by side so you can see what each path might look like in practice.
What are the benefits of rentvesting?
The appeal of rentvesting comes down to one central idea: it lets you get into the property market sooner, without having to compromise on where you live in the meantime. For buyers who are priced out of their preferred areas but don't want to wait to start building equity, that's a meaningful advantage.
According to Westpac's 2025 Home Ownership Report, more than half of first home buyers in Australia are now considering rentvesting as a pathway into the property market, up four per cent from the year before, with NSW leading at 61 per cent. That's a significant shift in how younger Australians are thinking about property, and it reflects the reality that waiting to buy in your ideal suburb is not always a realistic option.
It can be beneficial to get into the housing market earlier because it gives your investment time to grow. A property purchased in an area with strong fundamentals, such as population growth, employment, and infrastructure investment, has the potential to build equity over time, which can eventually be used to help you buy the home you actually want to live in. You're not giving up on home ownership; you're entering through a different door.
Rental income is another potential benefit. When your investment property is tenanted, that income offsets a portion of your mortgage repayments, which can make the holding cost more manageable. For investors, there's also the potential for tax deductions on eligible expenses such as loan interest, property management fees, insurance, and maintenance. For these types of financial advantages, it’s worth speaking to a tax adviser.
What are the risks of rentvesting?
Rentvesting comes with real risks, and it's worth being clear-eyed about them before you commit.
The most immediate financial pressure is carrying two housing costs at once. You're paying rent on the home you live in and servicing a mortgage on the property you own. If your rental income covers most of the mortgage, that's manageable, but if there's a vacancy period between tenancies, or your costs go up, you need to be able to cover the full mortgage from your own income without draining your finances.
Interest rate changes add another layer of risk. If rates rise, your mortgage repayments go up, and it’s unlikely that you’ll be able to immediately raise your rental rates to coincide with these rate rises.
Then there's the reality of being a landlord. Even with a property manager handling the day-to-day administrative tasks, situations such as repairs require your attention and your money. Budgeting for a maintenance reserve from the outset is the sensible approach.
Finally, the property market can fluctuate in ways that you don’t expect. An investment property in an area that doesn't perform as expected can leave you holding a property that hasn't grown in value and may be difficult to sell without a loss.
Can first home buyers still access government incentives when rentvesting?
This is one of the questions that often trips people up, and the short answer is: it depends, and you need to check carefully before assuming either way. The First Home Owner Grant is a one-off payment available through each state and territory government, and it's generally designed for buyers who intend to live in the property as their principal place of residence. The safest thing to do is check directly with your state's relevant authority before making any decisions. See below for links to the relevant body in your state.
The Australian Government 5% Deposit Scheme, which allows eligible buyers to purchase with a five per cent deposit without paying Lender's Mortgage Insurance, is specifically for owner-occupiers, so it doesn't apply when your first purchase is an investment property. Stamp duty concessions for first home buyers are similarly structured around owner-occupancy in most states, which means buying as an investor may mean forgoing those savings on your first transaction.
These schemes, their eligibility rules, and their property price caps all change. What was true when a colleague or family friend went through this process may not be accurate today. Verifying current rules directly with the relevant authority is the only reliable way to know where you stand.
What are the tax implications of rentvesting?
The tax side of rentvesting is quite involved, and getting proper advice before you purchase matters more than many people might expect.
When you own an investment property, the rental income you receive is assessable income and needs to be declared.
Against that, you can typically claim eligible deductions:
- Loan interest
- Property management fees
- Landlord insurance
- Council rates
- Maintenance and repairs
- Depreciation on the building or its fixtures (in some circumstances)
The ATO's guidance on residential rental properties sets out what can be claimed and how.
If your deductible expenses exceed your rental income, the property is considered negatively geared. Under current ATO rules, that loss can generally be offset against your other taxable income, such as your salary, which reduces your overall tax bill for that year. However, the Federal Government announced changes to negative gearing and Capital Gains Tax arrangements in the 2026–27 Budget, with reforms applying to property purchases from mid-2026 onward.
When you eventually sell your investment property, any profit is typically subject to Capital Gains Tax (unless an exemption applies). The changes to negative gearing and Capital Gains Tax arrangements are in the process of being passed into law, so if you're considering rentvesting, getting advice that addresses those changes is particularly important.
Speaking with your accountant or a financial planner can help you make decisions about what is right for your particular goals and situation.
How do you get started with rentvesting?
If rentvesting feels like it might suit your situation, these are the practical steps worth working through before you commit to anything.
1. Understand your borrowing capacity
Use IMB's borrowing power calculator to get a baseline sense of what you might qualify for as an investor.
2. Check your eligibility for government incentives
Find out how buying an investment property first will affect your eligibility for the First Home Owner Grant and stamp duty concessions in the state where you eventually plan to buy a home to live in.
3. Research potential investment locations
Look for areas with strong rental demand, low vacancy rates, and credible economic drivers: employment, infrastructure, population growth.
4. Model your cash flow carefully
Work out what the numbers actually look like across your mortgage repayments, rental income, property management fees, insurance, rates, a vacancy buffer, a maintenance budget, and the rent you're paying on your own home.
5. Get pre-approval for an investment loan
Speak with a lender or mortgage broker about your options before you start inspecting properties.
6. Seek tax and financial advice
A registered tax agent can walk you through the implications specific to your income and circumstances, particularly in light of recent changes to negative gearing and CGT rules.
7. Engage a solicitor or conveyancer
Once you've found a property, have a qualified conveyancer review the contract before you sign.
Is rentvesting right for you?
Rentvesting tends to suit people who are priced out of their preferred area, who are comfortable carrying two housing costs, and who are prepared for the reality of being a landlord.
The most important question is whether the numbers genuinely work for your situation, but in a realistic way that accounts for vacancies, rate rises, and unexpected expenses.
A conversation with a lender is a good first step because it grounds the decision in what's actually achievable rather than what sounds appealing in principle.
You can explore IMB home loan options as a starting point and take it from there.
Links for homebuyer government assistance
Find out more about your options when buying a home, first home grants and schemes, and how it may impact rentvesting.
NSW
• https://www.nsw.gov.au/housing-and-construction/buying-and-selling-property/home-buying-assistance
Victoria
• https://www.sro.vic.gov.au/first-home-owner
Queensland
• https://qro.qld.gov.au/property-concessions-grants/
South Australia
• https://www.revenuesa.sa.gov.au/FHOG
Western Australia
Tasmania
• First Home Owner Grant | State Revenue Office Tasmania
ACT
• https://www.revenue.act.gov.au/home-buyer-assistance/home-buyer-concession-scheme
