Aussie Firebug

Financial Independence Retire Early



What a horrible mash-up of words. Rentvesting? Rent-Investing? Rentvestor?


While the term itself doesn’t sit well with me, the underlying principles defiantly do and I think a ton of millennials could benefit from it, so listen up muchacho’s!

What The Hell Is Rentvesting?

Put simply ‘rent where you want to live, while you invest where it makes sense’

If you’re a citizen of Sydney or Melbourne, you may know about the incredible median house prices.

The stock standard formula for buying a house used to be:

  1. Get a good job
  2. Save enough money for the deposit
  3. Buy house
  4. Pay off the loan
  5. Live happily ever after

But as the great Bob Dylan once said


The new formula is now this:

  1. Get Arts degree
  2. Skip smashed avocado for 6,363 days
  3. Pay your deposit
  4. Spend the rest of your life paying off your loan
  5. Enter death blissfully knowing your financial situation will not follow you to the afterlife

I kid I kid.

But the point I’m trying to make is that the old school conventional way of buying a house in our two biggest cities doesn’t work anymore for the majority of people without financial help from their parents or inheritance.
This is because the game has changed! It ain’t what it used to be when ma and pop were hunting for a house.

Can Rentvesting Help?


As I have already explained with my Rent vs Buy article, renting is cheaper 90% of the time.

And if you live in either inner Melbourne or Sydney, this becomes 110% of the time.

So instead of taking on a mortgage in either of these two cities, why don’t you rent for a few years and invest where it makes sense to do so.

Rentvesting can get you into the housing market without the financial stress when buying in inner Melbourne and Sydney.

How Does It Work?


One rentvesting example might be ‘Harry Hipster’ from inner city Melbourne complaining that the housing market is rising faster than he can save for a deposit.

Harry desperately wants to enter the property market but cannot save enough for the deposit and is unsure if he will be able to make mortgage repayments without at least a 20% deposit. Caution Harry is also extremely hesitant about the Melbourne market being in a bubble and is worried that prices could come crashing down just after he has bought.

He has been very cautious of a potential crash for more than a decade now and year after year he has seen friends and family around him buy real estate and increase their wealth. He’s sick of being on the side lines but can’t afford to buy in inner Melbourne.

Harry discovers rentvesting and decides to take his savings and invest interstate where the property market is more affordable. The collected rent would cover the majority of costs associated with the investment with plenty of upside for capital growth.

Rentvesting has allowed Harry to get into the property market without the mortgage stress he would have had if he had bought in inner Melbourne. Furthermore, if Harry’s financial situation changes he can adapt quickly.

If Harry gets a raise, he can move into some place more luxurious. Maybe he loses his job? No worries, he can move somewhere more affordable until he finds his feet again. None of these luxury can be had once you lock yourself into a mortgage that you’re paying for. The investment property is an asset not a liability. The mortgage on the IP is not paid for by Harry, he has tenants that are paying that loan off for him.

After a few years Harry may decide to sell the IP getting back his savings plus whatever capital growth occurred during the years and use this money as a down payment for an inner Melbourne house. The entire time, Harry was in the property market and benefiting from whatever gains occurred instead of missing out on the sidelines. Harry was also not under financial stress and had the flexibility to live wherever he wanted to based on the circumstances he was in that year.


thumbs-up No mortgage stress thumbs-down You won’t be paying off your home to live in. There is a psychological connection to be paying off something that’s yours. Renting can feel like dead money
thumbs-up Ability to save and invest more thumbs-down No security in renting. Can get kicked out anytime
thumbs-up Exposure to the property market sooner thumbs-down Rentvesting is for the disciplined! A mortgage can act as a forced savings mechanism. Rentvesting relies on you having the discipline to stick to a budget and not blow the extra cash.
thumbs-up Flexibility to change your biggest expense (living costs) when it suits you.
thumbs-up Start building your wealth now not later
thumbs-up Invest on your terms. 9/10 the place you want to live in is not the best investment. Rentvesting allows you to live where you want and invest where it makes sense.
thumbs-up Frees up cash flow for more smashed avocado on toast ??


With the two biggest cities in Australia being more expensive than ever, more and more Australians are struggling to get their foot into the property market. Rentvesting can be used to get into the market without having the stress of paying a mortgage yourself.

Rent where you want to live, invest where it make sense.

My partner and I are rentvestors and have no plans to buy a house to live in anytime soon. This gives us the flexibility and freedom that we want this time in our lives. When circumstances change, we have the flexibility to adapt.

Are you currently rentvesting? Why? Why not?

Thoughts and feelings in the comment section below.

12 Responses to Rentvesting

  1. Bang on the money FIREbug. I’ve done exactly what you describe here, rentvesting, rentinvest’ing, or whatever term is trendy right now. Although my strategy is sort of the reverse of what you describe.

    I own property in the stupidly inflated Auckland market while renting a very affordable apartment in Brisbane where the arse is falling out of apartment rental returns.

    I was lucky enough to purchase before the market went silly so now my tenants pay my mortgage and costs while I live a far more affordable life in Queensland where the weather is much better.

    It’s an interesting time for property investment with reports that, with the huge number of apartments coming online soon, that the market is in for a big crash. What do you think the wise investor should be doing right now?

    • Nice timing 🙂

      I think there is still money to be made in real estate. But I’m not betting my chips in that asset class for the next year or so. I already have three properties so I feel like that’s more than enough exposure.

      I really can’t go past the principles of index fund investing which is way I have started to invest in ETF’s now.

      I think the wise move for all investors right now is to have that big cash buffer in place and continue to live as frugally as possible. I think there is real possibility of a huge downswing in the real estate market in both Sydney and Melbourne. And if you have the cash reserves sitting there ready to go, you could clean up BIG TIME.

      That said, I’m not one to try to time the market. It’s a hard call. I’ll probably stick with ETF’s until I get to over $100K worth and than reassess.

  2. Hey aussiebug, another good FIRE post. On the rentvesting topic, in what states are you guys currently investing in? Queensland? Any good resources to dig into the interstate topic? Thanks!

    • Queensland and Victoria mate.

      Pick up a few property investor mags and read some aussie forums like and to get a general consensus on where the majority of investors are parking their capital. Once you have a state and location, you really need to drill down into the finer details like what areas are good, what areas are dodgy, rental yield, population growth, unemployment rate, are they building things here in the next 3-5 years, if so what, what is your exist strategy, what is the main economic driver of your chosen location etc.

      The mags and forums are a good place to start though.

      Hope that helps 🙂

  3. Rentvesting – I like that new word mash up!

    We are renting, and investing.. But our investing sights are set on dividend stocks. Whether property or stocks is the investment of choice it is definitely clear that renting whilst we get ahead financially is the way to go for many millennials.


  4. Great article.

    The “rentvesting” approach also lets you apply leverage to maximise investment returns at a lower cost and lower risk than attempting to achieve the same outcomes via margin lending to purchase shares/funds. The key here is to ensure the properties are self funding (with enough of a safety margin to weather interest rate rises), to avoid adversely impacting your own lifestyle.

    Over time (if the property gods smile) the value of your property increases, providing the ability to use the accumulated equity as a deposit for the next self funding property. And the next. And so on.

    After repeating that process a few times it becomes possible to sell off a property or two, pay down the debt levels on the remainder, and end up with a fully paid off property that you could potentially live in rent/mortgage free throughout your retirement should you so desire.

    That’s pretty much the same position the traditional owner-occupier folks are striving for, with their 25 years of non-tax deductible mortgage payments. The difference is you got to live where you wanted to the whole time, while retaining a relatively passive income streams to help support your FIRE adventures.

    • The ability to leverage shares without the margin call is often overlooked by ‘anti’ property people.

      Each asset class has their pros and cons. Combining the cheap and easy ability of leveraging through property with shares (ETFs) is a winning combinations for me.

  5. I’ve been trying to run the numbers for rentvesting for myself.

    I’d be interested in your financial analysis of you’re happy to share the numbers.

    • Hi Kat,


      Basically, I take an educated guess using various online tools at what the house I’m looking to rent would cost me to buy.

      The house we are currently renting is worth about $220K I think.

      Interest rates for a mortgage are sitting around 4.2%

      So that’s $8,400 worth of interest with a $200K loan.

      Let’s add on all the other crap that comes with ownership:
      – Rates $1,400
      – Insurance $1,000
      – Water Utility Connection Fee $600
      – General upkeep costs ~ $800

      So it’s roughly $12,200 a year.

      We are currently paying $10,400 in rent. So savings are already $1,800

      And then you have to factor in the buying costs and stamp duty which usually works out to be about 5%. So that’s $10K that you won’t get back when you buy.

      And then you have to be confident that the housing market you’re buying in is going to do well.

      This didn’t stack up for us. We have put our faith in other property markets and the global share market instead of our local housing market.

      When stability becomes a priority for us, I suspect that we will buy locally. But in the meantime, we have been enjoying the growth elsewhere 🙂

      Hope that helps

Leave a reply


Nothing on this site is legal financial advice only the opinion and thoughts of an anonymous blogger. Always seek a licensed professionals advice when dealing with personal finance

Copyright © 2015 Aussie Firebug

Australian FIRE Calculator
Send it!
Get Calculator!
Join My Mailing List
Join over 1,000 others who get FREE Aussie Firebug updates, tips and tricks, and exclusive content!
No spam. Unsubscribe anytime.