Investment Strategy

24 July 2025

8 min read

Rentvesting in 2025: Why First-Home Buyers Are Rethinking the Great Australian Dream

Enter “rentvesting” – a growing trend in 2025 that’s turning the classic Aussie homeownership dream on its head.

Arun Venkatachalam

Helping Australians build wealth through smart property investing.

Not every first-home buyer in Australia is following the traditional path of buying a home to live in. Enter “rentvesting” – a growing trend in 2025 that’s turning the classic Aussie homeownership dream on its head. Rentvesting means renting where you want to live, while buying an investment property somewhere you can afford. Instead of purchasing a pricey home in the city and living in it (and perhaps compromising on lifestyle or location), many young Aussies are choosing to rent in their favorite area (say, an inner-city suburb or beachside locale) and invest their money in a property elsewhere that’s more affordable but has good growth potential. This way, they get the best of both worlds: the lifestyle they desire and a foot on the property ladder.

Why Rentvesting is on the Rise in 2025

Several factors are driving first-home buyers toward rentvesting this year:

• High Property Prices in Key Cities: Major cities like Sydney, Melbourne, and Brisbane have seen prices surge over the past decade, making it incredibly tough to buy your first home there. Rather than saving for years for a huge deposit on a city home, it can be quicker to buy a cheaper property in a regional area or smaller city. According to recent surveys, more than half of first-home buyers would consider rentvesting as a way to enter the market. This is a noticeable increase from previous years, reflecting how mainstream the strategy is becoming.
• Lifestyle Priorities: Millennials and Gen Z buyers place a high value on lifestyle. They might want to live near work hubs, cafes, beaches, or family – locations they love but can’t afford to buy in yet. Rentvesting lets them live in a vibrant, desirable area as tenants, while their money is invested in a property that’s financially sensible.
• Interest Rates and Lending Environment: With interest rates still relatively high (though starting to ease in 2025), borrowing big money for a dream home in a pricey suburb is challenging. By contrast, buying in an affordable market means a smaller loan and often a positively geared investment (where rental income covers most of the mortgage). Investors can also benefit from things like interest tax deductions on their loan. Essentially, rentvesting can be a less financially stressful way to own property, especially when rates are up – you’re not pouring all your income into an enormous owner-occupier mortgage.

Benefits of Rentvesting

Rentvesting offers a range of potential benefits for first-home buyers and investors:

• Get on the Property Ladder Sooner: Instead of waiting years to afford your “forever home,” rentvesting enables you to buy a property sooner in an area within your budget. You start building equity earlier, which can help you later upgrade to the home you truly want. In fast-growing markets, this is key – property values might be rising as you wait. Rentvesting gets you in the game before prices run further away.
• Lifestyle Flexibility: You’re free to live where you truly want. Love the buzz of the city or need to be near work in the CBD? Prefer the coastal lifestyle? You can rent there without a $1 million mortgage. If circumstances change (job relocation, etc.), it’s easier to move as a renter than if you owned the home. Meanwhile, your investment property is working for you elsewhere.
• Rental Income and Tax Perks: The property you buy is tenanted (ideally), so rent from tenants helps pay off your mortgage. In many cases, rentvesting properties are close to neutrally geared – meaning the rent covers a large chunk of expenses. If there’s a shortfall, you may claim tax deductions on loan interest, property management fees, maintenance costs, and depreciation. These tax benefits are not available when you own and live in your home. Over time, as rents increase, your investment can even turn cash-flow positive (putting extra money in your pocket each month).
• Capital Growth Potential: By choosing an investment in a high-growth potential area, you set yourself up for future capital gains. For example, some outer suburbs and regional towns are poised for growth due to new infrastructure, population shifts, or development. It’s not uncommon to find places where rental yields are high (5–6% or more) and property values are tipped to rise. (For instance, parts of Queensland and Western Australia currently offer robust rental yields alongside median house prices well below the big-city medians.) If your investment’s value increases, you could use that equity later to buy your dream home in your preferred location.
• Diversification and Wealth Building: Rentvesting can be a strategic way to build a property portfolio. Instead of putting all your funds into one expensive home, you might start with an affordable investment, then possibly another, etc. Meanwhile, you still have flexibility by renting your residence. It diversifies your assets and can accelerate wealth creation compared to waiting and buying one big home.

Risks and Considerations

Rentvesting isn’t a one-size-fits-all solution; there are risks and trade-offs to weigh:

• Missing First-Home Owner Perks: One downside: if you never live in the property you purchase, you might miss out on first-home buyer grants or stamp duty concessions in some states. Many government incentives require you to occupy the home for a period. Some rentvestors work around this by living in the property for the minimum time (say 6-12 months) to qualify, then renting it out. It’s worth researching your state’s rules or speaking to a broker so you don’t leave free money on the table.
• Landlord Responsibilities: Owning an investment property means being a landlord, which comes with duties and potential headaches. You’ll need to handle or pay for property management, deal with maintenance and repairs, and possibly face times of vacancy (no tenant for a period). Unexpected costs like a broken hot water system or a tenant who leaves early can impact your cash flow. It’s crucial to have a financial buffer (savings) to cover these instances.
• Managing Two Expenses: As a rentvestor, you have rent to pay for your own housing and a mortgage to pay for your investment. The goal is that your tenant’s rent largely covers the mortgage, but there can be shortfalls, especially at first. You must budget carefully to cover your rent and any difference between your investment’s rent and its costs. Essentially, you’re juggling two housing payments. For many, that’s still easier than one huge mortgage, but good cash-flow management is key.
• Capital Gains Tax (CGT): Unlike a family home, an investment property is subject to capital gains tax when you sell it for a profit. This means if your property’s value increases significantly, a portion of that gain will go to the taxman when you eventually sell. That said, many view it as a reasonable trade-off for growth and the other benefits. Just keep CGT in mind as a future cost.
• Emotional Aspect: Rentvesting requires a bit of a mindset shift. Culturally, Australians have long cherished owning the home they live in (the “Great Australian Dream”). It might feel strange or disappointing for some not to call their house their own. You’ll be investing “with your head, not your heart,” meaning the property you buy is chosen for numbers – yield and growth – not because you personally love it. Some people find it hard to rent long-term (you can’t renovate freely, landlord could sell, etc.). It’s important to ensure this lifestyle works for you emotionally, not just financially.

Hot Spots for Rentvestors – Where to Invest

One crucial aspect of rentvesting is choosing the right location for your investment. You’re generally looking for areas that are affordable, with high rental yields and solid growth drivers. Here are a few examples (hypothetical scenarios) illustrating what many rentvestors target in 2025:

• Regional Queensland: Cities like Rockhampton or Toowoomba offer house prices well below capital city levels (hundreds of thousands cheaper than Brisbane or Sydney) and rental yields around 5-6%. They have growing populations and diverse economies (e.g., agriculture, resources, education), which bode well for future demand. An investor can find a good family house, rent it out to locals, and benefit as these cities expand.
• Outer Metro Suburbs: In capital cities, some outer-ring suburbs or satellite cities (think Melton in Victoria or Penrith in NSW) still have relatively affordable entry prices. They often attract young families and renters, offering steady rent returns. Upcoming infrastructure (new transport links, schools, hospitals) in these areas can spur capital growth. Rental demand is usually consistent, since many residents can’t yet buy there themselves.
• Perth and WA Mining Towns: Perth has seen a resurgence, with affordable properties and strong yields (often above 5%). The state’s improved economy (mining, resources boom) and population growth make it an attractive rentvesting zone. Some investors also consider smaller mining towns for very high yields (sometimes 8-10%+), but those come with higher risk and price volatility, so thorough research is needed.
• Adelaide and Hobart Surrounds: Smaller capitals like Adelaide still have pockets with good affordability and charm. Adelaide’s economy is growing (defense, tech, etc.), and yields can be decent in certain suburbs. Tasmania’s market, especially areas around Hobart or Launceston, also presents opportunities – prices are lower than mainland capitals, and lifestyle appeal is drawing both renters and future retirees, supporting growth.

These are just examples. The key is to do your homework: look for areas with low vacancy rates (so your property will easily find a tenant), strong rents, and signs of future growth (job opportunities, infrastructure projects, population upticks). Buyers’ agents like InvestEase actually specialize in this – identifying high-yield, high-growth locations for clients. They often have access to research and on-the-ground insight into what suburbs are up-and-coming.

The New Mindset – Is Rentvesting for You?

Rentvesting in 2025 has shifted from being a niche idea to almost a mainstream strategy for first-home buyers. It underlines a broader rethink of the Aussie Dream: owning property doesn’t always mean owning your residence first. It’s about making your money work harder and being flexible. If you’re struggling to break into the market in your ideal living area, rentvesting is definitely worth considering.

However, it’s not a decision to rush. Evaluate your finances: can you comfortably handle the dual costs? Are you prepared to be a landlord? Also consider your life plans – for example, if you intend to settle and start a family in a few years, you might eventually want to buy a home to live in. Rentvesting can be a “stepping stone” strategy: it gets you started now, and later you might sell your investment (hopefully at a profit) to help buy that dream home.

Many young buyers report that rentvesting has given them a sense of empowerment – they’re not stuck waiting and watching the market run away. Instead, they’ve taken action and have an investment growing for them. As one successful investor put it, “I rent in a suburb I love, and I own property in a suburb I could afford. It’s the best of both worlds.” That sentiment captures why so many are rethinking the traditional route. In a market that’s challenging for first homes, rentvesting could be the key that unlocks property ownership for a generation of Australians.