Rentvesting to become ‘default strategy’ for investors
Recent reports of a rise in rentvesting among first home buyers are reflective of property affordability in Australia. Trends are likely to continue, said one expert.
Rentvesting has been steadily gaining momentum, with a 21.4 per cent increase in first-home buyers taking 'rentvesting' loans, growing twice as fast as the 9.1 per cent increase in owner-occupier loans.
Additionally, a recent Westpac survey found that 54 per cent of first home buyers would consider rentvesting, a 4 per cent increase from 2024.
Ravi Sharma, founder of Search Property and author of Retire Filthy Rich with Real Estate, said it has become an attractive option for young buyers as it helps get a foot in the door without sacrificing lifestyle.
“Rentvesting has gained popularity because it allows Australians to maintain the lifestyle they want; often close to work, cafes, and social hubs, while still getting a foot on the property ladder. It’s a strategy that focuses on buying with numbers rather than emotions,” said Sharma.
“Focusing on areas that have good growth potential and is affordable in line with your strategy while living in the area you desire by renting.
"With rising property prices in major cities, many are finding it financially smarter to rent in desirable areas and invest in high-growth locations elsewhere. It’s about being strategic, not emotional, when building long-term wealth," he said
This trend is only going to get more popular, said Sharma, with challenges in purchasing property becoming even more pronounced.
He even went as far as to say it will become the “default strategy” for investors.
“With affordability becoming more of a challenge and borrowing capacity under pressure, I believe rentvesting will become the default strategy for many aspiring investors,” Sharma said.
“As people become more financially educated and less emotionally driven about home ownership, they’ll realise it’s not about owning the roof over your head, it’s about owning the right assets that can fund your future.
"Rentvesting is scalable, and once people see the numbers work, it becomes a no-brainer especially for young Australians," Sharma said.
To be a “smart” rentvestor, Sharma said a borrower should pick a property where rental yield offsets a large portion of the holding costs.
This could be areas with tight vacancy rates, population growth, infrastructure spend, job creation, and housing supply.
“It’s all about understanding the numbers, and not just relying on capital growth,” he said.
There are also things to avoid when rentvesting. Sharma said “shiny new apartments in oversupplied markets” are a poor investment.
“Look for established homes in growth corridors where you see long-term potential. Most people don’t have the time to research this properly, which is why having the right team around you is essential to getting this right,” he said.
This article was originally featured on SPI sister brand, Broker Daily.