Rentvesting Calculator

Understanding rentvestings in Australia

What rentvesting actually is

Rentvesting describes an arrangement where you rent the home you live in and separately own an investment property somewhere more affordable. The reasoning is straightforward. In the major Australian capitals there is a substantial gap between what it costs to rent a given home and what it costs to own it, and a further gap between prices in the suburbs people most want to live in and the areas where entry level investment stock sits. Rentvesting attempts to use both gaps at once. It is a legitimate approach that suits some circumstances and not others, and this page is general information rather than a recommendation.

How the cashflow actually works

The arithmetic has four parts: the rent you pay, the interest on the investment loan, the holding costs of the investment property, and the rent your tenant pays. The out of pocket figure is what is left over. As an illustration using indicative 2026 figures, someone renting at $700 a week pays $36,400 a year in rent. A $600,000 investment loan at an indicative investor rate around six and a half percent costs roughly $39,000 a year in interest on an interest only basis. Rent received at $550 a week brings in $28,600 gross. Holding costs on a typical investment property, including management fees, rates, insurance, maintenance and a vacancy allowance, commonly total $8,000 to $12,000 a year, and considerably more if strata levies or land tax apply. Netting those out leaves a substantial annual out of pocket cost that has to be funded from salary.

The costs people leave out

Most rentvesting comparisons circulating online are optimistic because they compare rent against interest and stop there. Property management typically runs six to nine percent of rent collected plus a letting fee of one to two weeks rent each time a tenant changes. Council rates and water vary widely but $2,000 to $3,500 a year is a reasonable planning figure. Landlord and building insurance runs $1,200 to $2,000. Strata levies on an apartment commonly run $3,000 to $6,000 and carry the risk of a special levy for major building work. A maintenance allowance of around one percent of property value a year is the standard rule of thumb. Vacancy of at least two weeks should be assumed. Land tax applies once the unimproved land value of your investment holdings exceeds the relevant state threshold, and thresholds differ substantially between states.

Interest only lending and the reversion

Rentvesting arrangements are frequently structured on interest only lending, because paying interest alone rather than principal and interest materially reduces the early out of pocket figure and preserves cash. That is a reasonable structure, provided the borrower understands what happens at the end of it. Interest only periods on investment lending typically run five years, after which the loan reverts to principal and interest for the remaining term. Because the principal now has to be repaid over twenty five years rather than the original thirty, the repayment step up is sharp, commonly thirty to fifty percent. Some borrowers extend the interest only period, but extensions are subject to the lender's assessment at the time and are not guaranteed, particularly if serviceability has tightened. The prudent approach is to model the reverted repayment at the outset and confirm the arrangement remains viable on that figure, treating any extension as a bonus rather than a plan.

Tax, the main residence exemption and why advice matters

The tax treatment is where rentvesting becomes genuinely complex, and where general commentary is least useful. In broad terms, expenses incurred in producing rental income are generally deductible, and where those expenses exceed the rent, the shortfall may reduce other assessable income, which is the mechanism commonly described as negative gearing. Depreciation on eligible plant and on the building may also be claimable, subject to rules that depend on when the property was acquired and whether it was new. Against that, an investment property is subject to capital gains tax on sale, with a discount generally available where the asset has been held more than twelve months. Meanwhile the main residence exemption does not apply to a property you have never lived in. The absence rule can preserve it in some circumstances for a property you did live in and later rented out, but the conditions are specific. None of this can be assessed generically, which is why a session with a registered tax agent before purchase is worth far more than the fee.

Who it suits, and the honest risks

Rentvesting tends to suit people whose work keeps them in an expensive area, who have stable income, who are comfortable being a landlord, and who hold a genuine cash buffer. It suits people less well when the buffer is thin, when income is variable, or when the emotional cost of not owning the home you live in is understated at the outset. The structural risks are worth naming plainly. You are exposed on both sides of the housing market, since the rent you pay can rise while the investment underperforms. You have no security of tenure in your own home. Buying in an unfamiliar market at a distance is harder than it looks, and the affordable areas that make the arithmetic work often have weaker capital growth and higher vacancy. The shortfall usually has to be funded from salary, so unemployment hits both sides at once.

Next steps

Use the estimate above to see the annual out of pocket figure for your own numbers, then re run it on a principal and interest basis to see the reverted position, and again with a rate one to two percentage points higher to test the arrangement under stress. Take those three figures to a mortgage broker and a registered tax agent. This calculator is educational and does not account for capital growth, tax outcomes or your personal circumstances, and it is not financial, tax or property advice.