Reality of Rent-Vesting

Over the last few years, rent-vesting has taken off due to higher interest rates, tight borrowing capacity and marketing-savvy professionals who have become specialist buyers' agents.

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Social channels are full of "experts" betting on the regional price boom, with many First-Time buyers deciding to rent-vest rather than buy a home.

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"Why would I buy a home? I'm happy to go where the growth is, and rent" has been a convenient sales pitch.

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It makes sense; when interest rates are high and borrowing capacity is low, owning a home is hard on cash flow with a lifestyle compromise regarding where they have to live, versus renting somewhere they want to live and buying a higher cashflow investment property, often regionally.

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But what seems too good to be true often has some consequences that many rent-vesting don't consider when taking the easier option. 

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Firstly, they underestimated fast-rising rents, often thinking renting was easy and did not factor this in when they bought an investment property instead of somewhere to live. They are now much more aware and concerned about long-term rental challenges. 

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While some rent-vestors pick the correct location and get potential growth, when you dig deeper into after-tax, cash-in-hand numbers, it is often not as much as they believe.

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Firstly, you must pay for costs such as stamp duty, LMI, buyer's agents, and sunk costs to rent and maintain. These likely add 10 %+ to the price on day one, and when you do sell, you also have to subtract sale costs, often 3%. 

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The roughly 20-25% capital gains tax is often not factored in. More importantly, the opportunity cost depends on where they live and the price of their future home, which hasn't stood still.

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The continued growth in property values in their home cities in recent years and whatever after-tax net gains they made by rent-vesting will mean they have to pay more for a home when they finally want to. 

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Combine having to go through the challenge of the selling process and the whole buying process again to make it happen. 

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We often recommend clients buy a home, something they can grow into with no capital gains tax, stamp duty savings, no investment growth bet and re-entry risk, and emotional security as life changes. 

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We usually find that when couples start trying to have a family, their desire to own a home increases exponentially. The lifestyle benefits of security and stability often outweigh the potential of rent-vesting and trying to outperform buying a home.

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Right now, as interest rates fall and borrowing capacity increases, the market will likely return to an owner-occupier boom due to greater home affordability, particularly the widely expanded First-Home Guarantee scheme from 1 January 2026.

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Investors are also likely to switch to play in capital city markets to capture this growth, meaning those rent-vestors might have a significant opportunity cost of owning investments while not having a home solution.

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