Rentvesting: How It Works (and Whether It's Worth It)

🏘️ What rentvesting actually is🔗

Instead of buying in the suburb you'd actually like to live in, often the most expensive option, you rent there instead, and buy an investment property somewhere more affordable, sometimes a different city entirely. Rental income and negative gearing help offset the investment property's costs, while you keep the lifestyle flexibility of renting where you actually want to be.

This still assumes you've landed on property as the asset you want. If you're weighing that up against shares first, our property vs shares comparison is the better starting point.

📈 Why it's become so common🔗

The numbers explain a lot of the shift. Around 15% of Australian tenants are now estimated to be rentvestors, and a 2023 survey found 42% of respondents would consider it, well up from roughly a third a few years earlier. Millennials and Gen Z now account for more than half of property investment purchases in the past year, a large share of them rentvestors buying in more affordable markets while renting where they actually want to live.

💰 The tax side🔗

Because the property you own isn't your home, it's taxed as an investment, not exempt from capital gains tax the way a main residence is, and its holding costs (loan interest, rates, property management, maintenance) are tax-deductible against your income. If those costs exceed the rental income, that's negative gearing, which reduces your taxable income but doesn't eliminate the underlying out-of-pocket cost.

🔁 A related variant: the six-year rule🔗

A distinct but related scenario: if you've actually lived in a property as your main residence, then moved out and now rent elsewhere while renting that former home out, the ATO's "six-year rule" can let you continue treating it as your main residence for CGT purposes, fully exempt, for up to six years while it's tenanted. This only applies to a property that was genuinely your home first, it isn't a way to apply main-residence treatment to a straightforward rentvested investment property you never lived in.

You can't claim full exemption on two properties at once, so anyone using this rule needs to nominate which property is treated as the main residence for the overlapping period.

🧮 A worked example🔗

Someone wanting to live inner-city, where a home costs $900,000, but unable to save that deposit soon, instead buys a $500,000 investment property in a more affordable regional area with a $50,000 deposit, and continues renting inner-city for $550 a week. Rental income from the investment property covers a meaningful share of its own loan repayments, and they're building equity in a property they own from day one, rather than continuing to save toward the more expensive home with none of that equity growth happening in the meantime.

⚠️ The real risks🔗

🔑 Why the "no security of tenure" risk is smaller than it used to be🔗

🎯 The essential: Most of Australia's largest rental markets have now banned no-grounds evictions, a real, recent change to a risk long treated as a fixed feature of renting.

The lack of security that comes with renting has traditionally been one of rentvesting's clearest downsides, a landlord could end a lease without giving a reason. That's genuinely changed in most of the country. NSW banned no-grounds evictions from May 2025 as part of its biggest rental law overhaul in decades, joining Victoria, Queensland, the ACT and South Australia, which have all fully or partially banned the practice already. Several of these reforms also limit rent increases to once every 12 months, addressing the other common source of renting instability.

This doesn't eliminate the trade-off entirely, a landlord can still end a tenancy on specific, legislated grounds (the owner or a family member moving in, selling the property, and similar), and rules still vary meaningfully by state and territory. But it's a real, recent shift worth updating any older mental model of renting around, the "here today, gone in 30 days for no reason" risk that used to be a fair criticism of rentvesting is now a smaller, more specific risk in most of the country's biggest rental markets than it was even a couple of years ago.

🙋 Who it actually suits🔗

It suits people prioritising lifestyle and location flexibility now, over the certainty of owning where they live, and who are comfortable with the logistics and tax complexity of owning an investment property somewhere else. It suits it less well for anyone who values housing security highly, or who isn't prepared for the reality of managing tenants and maintenance on a property they don't see day to day.

Rentvesting isn't the only alternative to a straightforward purchase either. If you're weighing up renting where you live and skipping property altogether in favour of investing, our rent vs buy calculator models that comparison directly, home equity against an invested portfolio, over your own time horizon.

❓ Frequently asked questions🔗