Rentvesting in Australia: The Real Numbers vs Buying a Home
Rent in inner Sydney, invest in Brisbane: $175k less upfront and $19k a year cheaper. But you can lose FHB concessions, the 5% deposit scheme and CGT exemption. A side-by-side comparison.
Rentvesting means renting where you want to live and buying an investment property where you can afford to. For a lot of people in Sydney and Melbourne it is the only realistic way into the market without moving an hour from work. It is also widely misunderstood: it wins clearly on cash flow, loses on some big tax and grant concessions, and whether it wins overall depends on numbers most articles skip.
Side by side: buy a home vs rentvest
A couple wants to live in inner Sydney, where a suitable home costs $1.4M and rents for $900 a week. The alternative is to keep renting and buy a $700,000 investment house in Brisbane renting for $650 a week. Both use an 80% loan. Home loan at 6%, investment loan at 6.5%, 39% marginal tax rate.
| Buy $1.4M home | Rentvest | |
|---|---|---|
| Deposit (20%) | $280,000 | $140,000 |
| Stamp duty | ~$59,000 (NSW) | ~$24,500 (QLD) |
| Cash needed upfront | ~$339,000 | ~$164,500 |
| Annual housing cost | ~$72,200 $67.2k interest + $5k costs | ~$53,300 $46.8k rent + $6.5k after-tax loss |
| Asset exposed to growth | $1,400,000 | $700,000 |
| Growth at 5% / year | $70,000, tax-free | $35,000, taxable on sale |
Rentvesting needs about $175,000 less upfront and costs about $19,000 a year lessto run. Buying the home gives you twice the asset growing, and that growth is free of capital gains tax. If the couple can genuinely afford the $1.4M home, the growth usually wins over 10+ years. If they can't, rentvesting gets them into the market years earlier, and time in the market is what most property returns come from.
What rentvesting gets right
- Live where you want. Close to work, family and the lifestyle you're paying for.
- Buy where the numbers work. You can choose the best investment postcode in the country, not the best one within commuting distance.
- Deductions. Interest, management, rates and depreciation on the investment are deductible. On your home, none of it is.
- Flexibility. Moving for work or family means ending a lease, not selling a house and paying stamp duty again.
The costs nobody mentions
1. You can lose first home buyer concessions
In most states, buying any residential property, even an investment you never live in, means you are no longer a first home buyer. You can lose the First Home Owner Grant and first home stamp duty concessions on your future home. On a $700,000 home in NSW, the duty exemption alone is worth over $26,000. Check our FHB grants guide and your state's rules before you buy.
2. The 5% deposit scheme is for owner-occupiers
The First Home Guarantee requires you to live in the property. You can't use it for an investment, so rentvesting usually means saving a full 20% deposit or paying LMI.
3. No main residence exemption
You will pay capital gains tax when you sell, because you never lived there. The six-year rule doesn't help either; it only applies to a property that was your home first. Our CGT guide shows what that costs.
4. Rent goes up and you can be asked to leave
Your housing cost is exposed to rent rises and lease non-renewals. The cash-flow advantage in the table above shrinks every time your rent rises faster than your investment's rent.
5. Land tax
Your home is exempt from land tax; an investment may not be. In the ACT it applies from the first dollar. In most states it starts above a threshold.
Who rentvesting suits
- People who want to live in a market where buying is out of reach for years
- People likely to move for work in the next five to ten years
- Higher-income earners who benefit more from deductions
- People who have already used, or don't qualify for, first home buyer concessions
If you are rentvesting, the loan structure changes too. With no home loan, the main argument for interest-only falls away. See interest-only vs P&I.
Find where to buy
Rentvesting only works if you buy in the right postcode. The PropPulse Suburb Finder matches every Australian postcode to your budget, income and strategy. For a starting list, see our rankings for Brisbane, Perth, Adelaide and Canberra, or get a free report.