Brokers who understand pros and cons of rentvesting stand to benefit from this popular first-home buyer strategy
Rentvesting has emerged as a popular strategy for first-home buyers (FHBs) who are struggling to enter the property market amid rising living costs and out-of-control house prices.
In simple terms, rentvesting is a property investment strategy where FHBs purchase an investment property while continuing to rent where they want to live.
Rather than purchasing a home in their preferred – but potentially unaffordable – location, rentvesters choose to buy an investment property in a more affordable area. They then use the rental income from that property to help cover their investment loan repayments while renting a home in their desired location.
MPA caught up with the experts to get a better understanding of what rentvesting is and why it’s such a buzzword right now.
Is this an increasingly popular strategy, and if so, why?
“Yes, rentvesting is experiencing growth,” lenders mortgage insurance (LMI) provider Helia told MPA, highlighting recent buying trends among FHBs.
The data shows that FHBs are entering the property market as investors at a far faster clip than as owner-occupiers. This is “a clear sign of growing interest in rentvesting”, according to Helia.
In fact, FHB investor loans increased by 12% in the 12 months to June 2025 – three times the rate of growth of FHB owner-occupier loans, according to money.com.au analysis.
This suggests a clear motivation among FHBs to enter the property market are investors.
Lifestyle preference is the biggest motivation behind rentvesting, “with more people wanting to live in trendy inner-city areas while building wealth through property investment”, Helia said.
Matt Spears (pictured, left), finance broker at Sydney-based Evoke Capital, added: “The strategy only works when an individual is gaining a substantial benefit to rent where they would like to live versus buy where they would like to live – and importantly takes action by investing in property and using the difference in their rent versus potential repayments to carry their investment portfolio.”
For example:
- A client lives in Bondi and pays around $800 per week to rent a $1.5 million apartment (2.7% yield for landlord)
- To own this apartment, it would cost the client $1,600 per week assuming principal and interest at around 80%
- “The benefit here is $800 per week in additional discretional income for the client that they can use for investing – with no impact or change to their lifestyle,” Spears explained.
Where are rentvesters living, and where are they investing?
“We find that rentvesting works better for people who want to live in affluent areas of $1 million plus, given the lower residential yields,” said Spears.
If a client’s rent was the same or similar to mortgage repayments, then a case could be made that buying is better, he added.
Rentvesters tend to live in central, trendy locations around the inner parts of Sydney, Melbourne or Brisbane, while holding investment properties in more affordable, up-and-coming areas. According to Helia, these include:
- Regional Queensland and New South Wales
- Outer suburban areas of major cities
- Emerging growth corridors
How can rentvesters take advantage of LMI?
Lenders Mortgage Insurance (LMI) allows eligible home buyers, including rentvesters, to access investment loans with deposits less than 20%.
While government incentives have minimised the necessity to pay for LMI, it remains a useful tool for non-eligible homebuyers.
"LMI is a game-changer for rentvesters who want to get into the property market sooner," said Greg McAweeney (pictured, right), chief commercial Officer at Helia. "It provides the flexibility to start building an investment portfolio without waiting years to save a full 20% deposit."
LMI is not cheap, with the average fee being around $9,700, but Helia noted that it can be tax deductible in certain circumstances.
What are the hidden costs/pitfalls of rentvesting?
Despite the rising popularity of rentvesting, it is not without risk. Helia warns of:
- Higher home expenses (repaying a mortgage whilst paying rent)
- Needing sufficient income to service the loan
- Property management fees (typically 7-9% of rental income)
- Vacancy periods reducing income and still paying investment loan repayments
- Interest rate rises increasing loan repayments
- Capital gains tax when selling (no main residence exemption)
- Tax complexity
- Cash flow challenges
- Negative gap between rental income received and loan repayment, and rental income doesn't cover all expenses
- Maintenance and repair costs
- Potential rental increases in their preferred living location
How can brokers tap into rentvesting opportunities?
“I think brokers should point out the benefits and opportunity costs of buying a home versus rentvesting,” said Spears. “These holistic conversations will allow their clients to explore all options and make informed decisions on what is best for them and their family."
McAweeney agreed that brokers are best able to take advantage of rentvesting opportunities when they are able to properly educate clients on the benefits and risks.
"Rentvesting isn’t just a fallback option – when structured well, it can be a smart financial strategy for many home buyers," said McAweeney. "Brokers who can educate and guide clients on these opportunities are helping them build wealth while still enjoying their preferred lifestyle."
In terms of target demographics, rentvesters tend to be younger professionals in pricey cities, and priced-out FHBs who nonetheless have decent incomes and a desire to live in desirable parts of town.
Brokers can also work with buyers' agents who specialise in investment properties and accountants who are familiar with investment property taxation.
“The key for brokers is positioning rentvesting as a potential wealth-building strategy that allows clients to have the best of best worlds – living where they want while building equity where they can afford it,” said Helia.
