Investment Property: Rentvesting vs. Buying - Which Strategy Works Best in Today’s Market?

Introduction

As property prices continue to challenge first-home buyers, alternative strategies like rentvesting have gained popularity. This article examines the rentvesting approach compared to traditional homeownership, helping prospective buyers determine the best path forward in 2025, whether they choose to rentvest or buy an investment property. At Pivot Invest, we take a strategic, evidence-based approach to property investment, ensuring every decision is backed by thorough market analysis and long-term financial planning.

Understanding Property Investment

Property investment is a popular way to build wealth and achieve financial freedom. It involves buying, owning, and managing a property to generate rental income or sell it for a profit. When you buy an investment property, it is crucial to align this decision with your overall investment plan and understand factors like market research, financial goals, and potential risks. Understanding property investment is crucial to making informed decisions and avoiding costly mistakes. Here are some key concepts to grasp:

• Property Investment Types: There are various types of property investments, including residential, commercial, and industrial properties. Each type has its own advantages and challenges, so it’s essential to choose the one that aligns with your investment goals.
• Investment Strategies: Investors can choose from different investment strategies, such as buy-and-hold, renovation, or development. Each strategy requires a different approach and level of involvement, so it’s important to select one that matches your risk tolerance and financial objectives.
• Property Market: The property market is subject to fluctuations, and investors need to stay informed about market trends and conditions. Keeping an eye on factors like interest rates, economic indicators, and local market dynamics can help you make better investment decisions.
• Property Managers: Property managers play a crucial role in managing rental properties and ensuring a smooth investment experience. They handle tasks such as tenant screening, rent collection, and property maintenance, allowing investors to focus on growing their property portfolio.

Understanding Rentvesting in Property Investment

Rentvesting involves purchasing an investment property in a more affordable area while renting a home in a preferred location. Rentvesting opens up various investment opportunities in more affordable areas, allowing individuals to diversify their property portfolio. This strategy allows individuals to gain exposure to property markets without compromising on lifestyle preferences. However, higher interest rates and increased rental costs have changed the financial equation. Rentvesting is becoming increasingly popular, with 54% of first-home buyers considering this approach in 2025, a 4% increase from the previous year. New South Wales leads the way, with 61% of potential buyers exploring rentvesting, followed by Victoria at 54% and Queensland at 52% (Westpac Home Ownership Report 2025). Unlike speculative investing, Pivot Invest focuses on acquiring blue-chip properties in capital cities with a proven track record of growth, reducing risk and ensuring long-term returns.

Financial Benefits of Rentvesting for Financial Freedom

Rentvesting can provide a way to enter the market sooner with a smaller deposit, particularly in expensive cities like Sydney and Melbourne, while also offering the potential for a strong rental yield. For example, in 2019, rentvesting allowed buyers to maintain a more balanced cash flow, but by 2024, rising interest rates and increased property prices have significantly reduced its financial appeal. In 2019, renting a two-bedroom apartment in Sydney costs $890 per week, and buying an investment property in Newcastle requires $735,000. By 2024, these figures had surged to $1150 per week in rent and $1,042,500 for a Newcastle property, significantly increasing the financial burden (AFR). Pivot Property Buyers Agents specialise in the Sydney property market and take a long-term portfolio approach, ensuring that rentvestors not only acquire their first property but also have a roadmap for future investments to maximise wealth creation.

Lifestyle Flexibility and Rental Yield

One of the primary advantages of rentvesting is maintaining flexibility to live in desired locations while investing elsewhere. In major cities, where homeownership might be financially out of reach, rentvesting allows individuals to reside in vibrant areas with strong rental demand without committing to million-dollar mortgages. However, the increasing cost of renting in 2024—$1150 per week for a two-bedroom apartment in Sydney—has made this strategy less attractive than in previous years. In 2019, Sarah had $900 per week left for her lifestyle, but in 2024, this dropped to $450 per week, limiting her financial flexibility. Additionally, 82% of buyers surveyed in 2025 are now willing to consider purchasing in areas they had not originally planned for, indicating a shift in expectations due to affordability pressures (Westpac Home Ownership Report 2025). At Pivot Invest, we leverage proprietary market analysis tools to identify the most profitable investment locations, ensuring clients invest in areas with strong capital growth and high rental demand.

Weighing the Risks of Investment Strategies

While advantageous, rentvesting carries potential risks. Market fluctuations, rental vacancies, and capital gains tax (CGT) can impact financial returns. It is important to refer to the Australian Taxation Office for guidance on tax obligations related to investment properties. Compared to 2019, the cost of rentvesting in 2024 has increased by approximately $24,000 per year, making it a more expensive strategy. Additionally, mortgage rates remain high, adding pressure on investors to cover property costs during periods of tenant vacancy. The cost of an owner-occupier strategy has also increased, with additional expenses of $31,000 per year compared to 2019. Rentvesters also face potential CGT liabilities when selling their investment properties, further reducing their profits (Australian Financial Review). To mitigate these risks, Pivot Invest provides expert financial structuring guidance, ensuring investments are tax-efficient and strategically positioned for long-term success.

Key Factors in Investment Property Selection

Selecting the right investment property is critical to achieving success in property investment. Here are some key factors to consider:

• Location: Location is a key factor in determining the value and rental potential of a property. Look for areas with strong capital growth, high rental demand, and good infrastructure. Proximity to amenities like schools, public transport, and shopping centres can also enhance a property’s appeal.
• Property Type: Different types of properties have different characteristics and rental potential. Consider your budget and target market when deciding between a house and a unit. Houses may offer more space and privacy, while units can be more affordable and easier to maintain.
• Age of the Property: The age of a property can affect its maintenance costs and rental potential. Older properties may require more repairs and renovations, while newer properties might come with modern features and lower upkeep costs. Research the condition of the property and consider the need for renovations.
• Property Features: Property features such as a garage, additional bathrooms, and home office space can increase rental value. Consider the layout and design of the property to determine its rental potential. Features that cater to the needs of your target tenants can make your property more attractive and easier to rent out.

When you buy an investment property, it is important to consider factors such as rental yield, capital growth, and market stability to ensure you are making a sound investment.

The Impact of Interest Rate Cuts

The recent 0.25 percentage point interest rate cut by the Reserve Bank of Australia has provided some relief for investors, but its impact remains limited. The cut is particularly beneficial in areas with high capital growth potential. For example, Melbourne investor Stefan Belevski estimates a saving of just $340 a month across his three properties, which is not enough to justify lowering rents (Australian Financial Review). While investors benefit from slightly lower mortgage repayments, costs remain high due to increased land tax, insurance, and council rates.

Despite the rate cut, investors in Sydney still face a $1429 monthly shortfall between rising mortgage repayments and rental income. Even in high-growth rental markets such as Perth and Brisbane, landlords are grappling with deficits of $1373 and $1397 per month, respectively. This means rentvesting remains an expensive option, even with marginally lower interest costs. Pivot Invest helps clients maximise cash flow by identifying properties with strong rental yields and potential for equity growth through renovations and strategic upgrades.

The Case for Traditional Homeownership

Buying a home remains a preferred strategy for many Australians. Property investors often weigh the benefits of security and stability against potential investment returns. While upfront costs may be higher, owner-occupiers benefit from security and stability. In 2024, purchasing an entry-level home in a regional market may provide better financial outcomes than rentvesting due to reduced long-term costs and equity growth. In 2019, owner-occupiers in Newcastle retained $63,000 per year after expenses, whereas in 2024, they had $34,000 per year, highlighting the increased financial strain on homeownership. Additionally, Westpac’s research found that 13% of Australians plan to purchase a home by the end of 2025, up from 10% the previous year, reflecting renewed optimism in the property market (Westpac Home Ownership Report 2025). For buyers considering traditional homeownership, Pivot Invest provides full-service support from asset selection to financing solutions, ensuring every investment aligns with long-term financial goals.

Both rentvesting and traditional homeownership have their merits. While rentvesting offers flexibility and potential investment growth, higher costs and increased financial strain in 2024 make it a less compelling option than in past years. The recent interest rate cut has provided some relief, but landlords continue to struggle with increasing costs, meaning tenants are unlikely to see rent reductions. However, with more than half of first-home buyers still considering rentvesting in 2025, it remains a viable option for those willing to adapt their expectations and investment strategies. Pivot Invest offers a structured, long-term investment roadmap, guiding clients through every stage of their property journey to ensure sustainable wealth creation. Prospective buyers should assess their financial situation, lifestyle preferences, and long-term goals to determine the most suitable strategy in the current property market.

Australian Property Market Overview

The Australian property market is a complex and dynamic system that offers a range of investment opportunities for property investors. With a strong economy and a growing population, the demand for housing and commercial property is high, making it an attractive market for investors. However, the market is also subject to fluctuations in supply and demand, interest rates, and government policies, which can impact property values and rental yields.

To navigate the Australian property market, it’s essential to have a deep understanding of the current market trends, including the performance of different regions, cities, and suburbs. Property investors should also be aware of the various types of investment properties available, including houses, units, apartments, and commercial properties. By staying informed about these factors, investors can identify the best investment opportunities and make strategic decisions that align with their financial goals.

Costs and Expenses

When investing in property, it’s essential to consider the various costs and expenses involved. These can include:

• Purchase costs: stamp duty, conveyancing fees, and other transaction costs.
• Ongoing expenses: loan repayments, interest, council rates, strata fees, insurance premiums, and maintenance costs.
• Property management fees: fees charged by property managers to manage the property and collect rent.
• Vacancy rates: the percentage of time the property is vacant and not generating rental income.
• Capital gains tax: tax payable on the profit made from selling the property.

It’s crucial to factor these costs into your investment strategy to ensure that you’re generating a positive cash flow and achieving your investment goals. Effective management of these expenses can significantly impact the overall profitability of your investment properties.

Tax Implications

The Australian Taxation Office (ATO) provides various tax benefits for property investors, including:

• Negative gearing: the ability to offset losses from the property against other income.
• Depreciation: the ability to claim a deduction for the decline in value of the property and its fixtures and fittings.
• Capital gains tax: tax payable on the profit made from selling the property.

However, the ATO also imposes various tax obligations on property investors, including:

• Tax on rental income: tax payable on the income generated from renting the property.
• Goods and Services Tax (GST): tax payable on the purchase of new properties or the provision of rental services.

It’s essential to consult with a tax professional to ensure that you’re meeting your tax obligations and taking advantage of the available tax benefits. Proper tax planning can enhance the financial performance of your investment properties and help you achieve your long-term investment goals.

Creating Wealth through Property Investment

Property investment can be a powerful way to create wealth and achieve financial freedom. Here are some tips to help you get started:

• Start with a Solid Investment Strategy: Develop a clear investment strategy that aligns with your financial goals and risk tolerance, whether you buy an investment property, undertake renovation projects, or engage in property development. Having a well-defined plan is essential for success.
• Build a Diversified Property Portfolio: Spread your investments across different property types and locations to minimise risk and maximise returns. Diversification can help protect your portfolio from market fluctuations and provide multiple income streams.
• Focus on Strong Capital Growth: Look for areas with strong capital growth potential and invest in properties that are likely to appreciate in value over time. Research market trends and economic indicators to identify high-growth locations.
• Manage Your Cash Flow: Ensure that your rental income covers your expenses and leaves you with a positive cash flow. Effective cash flow management is crucial for maintaining financial stability and growing your property portfolio.
• Seek Professional Advice: Consult with a Sydney Buyers Agent or financial advisor to get personalised advice and guidance. Professional advice can help you navigate the complexities of property investment and make informed decisions that align with your long-term financial goals.

By understanding the fundamentals of property investment, selecting the right properties, and implementing effective investment strategies, you can build a successful property portfolio and achieve financial freedom.

Conclusion

Investing in property can be a lucrative and rewarding experience, but it requires careful planning, research, and strategy. By understanding the Australian property market, considering the various costs and expenses, and being aware of the tax implications, property investors can make informed decisions and achieve their investment goals.

Whether you’re a seasoned investor or just starting out, it’s essential to seek professional advice from a qualified property investment advisor or financial planner. They can help you develop a tailored investment strategy that meets your needs and goals and provides you with the financial freedom you desire.

Remember, investing in property is a long-term game, and it’s essential to be patient, persistent, and informed to achieve success. With the right approach and strategy, you can build a strong property portfolio and enjoy the benefits of property investment for years to come.