Breaking into Sydney’s property market has never been more challenging. With skyrocketing prices making homeownership less accessible, many Australians are turning to rent-vesting—a strategy where they rent in their preferred location while buying an investment property in a more affordable area.
What is Rent-Vesting?
Rent-vesting allows first-home buyers to enter the property market sooner by purchasing an investment property instead of waiting years to save a deposit for their dream home. Instead of buying where they want to live, they buy where they can afford and rent in a location that suits their lifestyle.
Recent Westpac data highlights a surge in rent-vesting, with the number of first-home buyers choosing to invest rather than occupy their properties more than doubling in the past five years (9 News).
The Benefits of Rent-Vesting
Rent-vesting offers several financial advantages, including:
✔ Rental Income Helps Repay Your Loan – The rent from your investment property contributes to your mortgage repayments, reducing out-of-pocket expenses.
✔ Tax Benefits – Unlike an owner-occupied home, investment properties allow you to claim tax deductions on expenses such as mortgage interest, depreciation, and rates. According to 9 News, if your income falls between $45,000 and $135,000, you could claim back up to 32% of these costs on your tax return.
✔ Get a Foot in the Property Market – Instead of waiting years to save a deposit for an expensive home, rent-vesting lets you start building wealth sooner by benefiting from property price growth.
What to Consider Before Rent-Vesting
While rent-vesting has many advantages, it’s important to be aware of the potential downsides:
⚠ Capital Gains Tax (CGT) – Unlike your primary residence, investment properties incur capital gains tax when sold. This means a portion of your profit will go to the ATO.
⚠ Rental Costs – To make rent-vesting work, you’ll need to keep your own rental costs manageable. It’s important to take a numbers-driven approach, ensuring the strategy is financially viable rather than an emotional decision.
Is Rent-Vesting Right for You?
Every investor’s situation is different, and rent-vesting isn’t a one-size-fits-all solution. Consulting with a mortgage broker and accountant can help determine if it’s the right strategy for you.
If you’re considering rent-vesting, Shore Financial can help structure your loan to maximise the benefits. Get in touch today to explore your options.
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