Rentvesting in 2026: Buy Where You Can Afford, Live Where You Want

Can't afford to buy where you want to live? You're not alone. With Sydney's median house price at $1.6 million and mortgage repayments on a comparable property running $1,700+ a week, a growing number of first home buyers are flipping the traditional playbook: they're buying an investment property in an affordable area while continuing to rent where they actually want to live. It's called rentvesting — and in 2026, it's one of the fastest-growing strategies in Australian property.

What Is Rentvesting?

Rentvesting is simple in concept: instead of buying a home to live in, you buy an investment property in a location you can afford — often in a different suburb, city, or even state — and continue renting in the area that suits your lifestyle, work, or family.

The idea is that you get onto the property ladder and start building equity and wealth, while still living where you want without being locked into a suburb you'd never choose to live in just because it was affordable.

Why Rentvesting Is Surging in 2026

The numbers tell the story. According to ABS lending data analysed by Property Update:

• First home buyer investor loans grew 21.4% annually — more than double the 9.1% growth in owner-occupier FHB loans
• NSW leads the trend: 9.3% of all FHB loans in NSW are now for investment properties, with investor loan growth of 31.3% annually
• 61% of NSW buyers are considering rentvesting as a strategy
• The average first home buyer loan has surpassed $525,000 for the first time (up 6.4% year-on-year)

The driver is straightforward: affordability. In Sydney, renting a two-bedroom apartment in the inner suburbs costs $800-$900 a week. Buying a comparable property would mean repayments of $1,700+ a week. But buying an investment property in a growth corridor — say Brisbane, Adelaide, or regional NSW — could cost half that, with the rental income covering a large chunk of the mortgage.

The Tax Advantages

This is where rentvesting really shines compared to buying a home to live in. As a property investor, you can claim tax deductions that owner-occupiers cannot:

• Loan interest — the biggest deduction, often $25,000-$35,000 per year on a typical investment loan
• Depreciation — building and fixtures depreciation (especially valuable on newer properties)
• Property management fees — typically 7-10% of rent
• Council rates, insurance, repairs and maintenance
• Negative gearing — if your property runs at a loss (expenses exceed rental income), that loss reduces your taxable income

For someone on a $100,000 salary with a negatively geared investment property, the tax benefit can be worth $5,000-$10,000 per year in reduced tax — money that effectively subsidises the cost of holding the property. Use our Investment Property Tax Calculator to estimate your benefit.

The Risks and Downsides

Rentvesting isn't a free lunch. There are real trade-offs to consider:

Is Rentvesting Right for You?

Rentvesting tends to work best if:

• You're priced out of buying where you want to live (especially Sydney and Melbourne)
• You're happy renting for the medium term (3-7+ years)
• You have a stable income and can handle the risk of vacancies or rate rises
• You're comfortable managing (or paying someone to manage) a property remotely
• You want to start building equity and wealth now rather than waiting years to save a bigger deposit

It's less suited if you value the stability of owning your own home, want to renovate or personalise your living space, or are relying on first home buyer grants to get started.

Where Are Rentvestors Buying?

The most popular strategy is buying in high-growth, affordable markets while renting in expensive capitals. Current hotspots include:

• Brisbane: Still offering strong growth (up 16.5% annually) with entry points under $600K
• Adelaide: Consistent performer with tight vacancy rates and solid rental yields
• Perth: The nation's top performer in 2026 (up 2% in January alone) with rents surging 66% in 5 years
• Regional NSW: More affordable entry points with proximity to Sydney for property management
• Victoria: Melbourne is showing early signs of a comeback, with the lowest entry prices among major capitals

5 Tips If You're Considering Rentvesting

1. Run the numbers properly. Add up your rent, mortgage repayment minus rental income, property expenses, and tax benefits. Use our Rent vs Buy Calculator and Tax Benefit Calculator to model scenarios.
2. Get an investment loan pre-approval first. Lenders assess investment loans differently — your rental income counts (usually at 80%), but the interest rate is higher. Know your borrowing power before you start looking.
3. Budget for vacancies. Assume 2-4 weeks vacancy per year and keep a cash buffer of at least 3 months' mortgage repayments.
4. Consider the FHOG workaround. In most states, you can claim the First Home Owner Grant if you live in the property for 6-12 months first, then move out and rent it. This lets you access up to $10,000-$30,000 in grants before switching to rentvesting.
5. Talk to a broker. The loan structure matters. Interest-only vs principal-and-interest, offset accounts, and how the loan is set up for tax purposes can make a significant difference to your cash flow.

Sources: ABS Lending Indicators December 2025; Property Update; Australian Broker News; NAB; The Adviser; Specialist Finance Group