Rentvesting

The modern world demands modern investment solutions: a smart property play

Let's face it, the dream of owning a sprawling villa with a white picket fence – while still alive and well for some – looks a little different for many of us these days. The world has become more fluid, careers take us to new cities (sometimes even new countries!), and the traditional path to property ownership can feel… well, a little stuck in the mud.

In fact, there's a name for a solution to this situation: rentvesting. It’s a strategy that more and more Kiwis are exploring — and for good reason.

Here at Become Wealth, we’re big believers in working smart, not just hard. That means thinking outside the white-picket-fence box when it comes to your financial future. Rentvesting (sometimes called rent-investing or 'rent and invest') offers a practical pathway for those who want to get ahead financially — without being tied down by a mortgage in a suburb they might not even like.

Let’s unpack this financial strategy, look at the pros and cons, and figure out whether it might be the move that helps you take control of your financial destiny.

What is Rentvesting?

Put simply, rentvesting is when you rent the home you live in, while owning an investment property elsewhere. It lets you live where you want and invest where it makes the most sense. Instead of squeezing yourself into a cramped flat in an area you can afford to buy, rentvesting might allow you to be a tenant in a location that suits your lifestyle — close to work, culture, or the beach — while you’re simultaneously a landlord whose money works hard in a suburb with better investment fundamentals.

Rentvesting in Action

Imagine you’re living in a central city apartment for $700 a week, and you’ve purchased a 3-bedroom investment property in an upcoming outer suburb that rents for $550 a week. You're living close to work, enjoying your lifestyle, while your property hopefully grows in value better than properties near where you live. Location aside, most pundits believe a typical standalone house should appreciate better in value – that is, achieve a better rate of capital gain – when compared with a typical apartment. You also get to avoid a lengthy commute, as you live near where you work, so you can spend more time doing the things you enjoy.

Why Consider Rentvesting?

You might be thinking, “Rentvesting? Sounds a bit… backwards, doesn’t it?” Renting where you want to live while investing in property elsewhere? It might seem counterintuitive at first glance, but trust us, this approach is gaining serious traction for a reason.

The world has changed. People switch jobs more often, travel more frequently, and crave flexibility. Committing to a 30-year mortgage in your dream location might sound noble, but it can also be unnecessarily restrictive.

Here’s what makes rentvesting appealing:

Mobility

Live where you want without being tied down.

Rentvesting offers a sense of liberty and freedom. You’ll be untied to any one location, so can seize opportunities – such as a great career opportunity on the other side of the city, without being concerned about a lengthy commute from your owner-occupied house. Or perhaps it’s a great opportunity in another city altogether!

You can pursue that exciting job in Auckland, even if property prices there seem out of reach for your first investment. You can enjoy the vibrant culture of Wellington’s inner city while investing in a more affordable regional market.

Affordability

There are two parts to this:

1. You might not be able to afford to buy in your preferred suburb, but you can afford to rent there.
2. Most people can’t afford their dream home right away, so rentvesting enables people to at least jump on the property ladder and start building equity and wealth which might one day help them live in that dream area after all! In other words, you can enter the property market at a more reasonable entry point (price).

Lifestyle Versus Investments

When you’re not emotionally attached to the property you live in, you can make more objective investment decisions.

When you first buy, you can focus purely on the numbers – rental yields, capital growth potential, and long-term market trends – rather than being swayed by emotional factors like the colour of the kitchen cabinets or the size of the backyard.

Then, on an ongoing basis you can avoid being overly attached to your property. Meanwhile some owner-occupiers might overspend on home improvements which aren’t necessary, or have their weekends occupied with household maintenance or chores. Rentvesting means you’ll avoid such lifestyle traps.

You can also avoid limiting your investment opportunities to the geographical area where you happen to live.

In other words, you can clearly separate your lifestyle choices from your investment decisions.

Tax Advantages

Owning an investment property usually comes with tax deductions that owing a primary residence doesn’t.

Have you just paid your council rates, or home insurance? If you paid these bills, or more, for an investment property, they’re usually tax deductible. That’s not the case with an owner-occupied home.

To expand on this idea properly, costs an investment property generates are deductible expenses — such as mortgage interest, repairs or maintenance costs, rates, and insurance. These deductions can be offset against the rental income you earn, potentially reducing your overall tax liability. While tax isn’t ever a thing you should rely on alone, it's a useful feature that can help improve the long-term viability of rentvesting.

Always seek personalised accounting or tax advice, as tax rules are complex and are regularly updated.

Lifestyle Balance

Perhaps you love the buzz of city living, close to your work and social life. Or maybe you crave the tranquility of a coastal town while working remotely. Rentvesting allows you to live where you want to live, without being tied down by the constraints of homeownership in any one specific (often expensive) area. You can chase career opportunities, enjoy vibrant cultural scenes, or simply reside in a location that brings you joy – all while building your wealth through property investment elsewhere.

Rentvesting: What to Watch Out For

Of course, no strategy is perfect. Here are some key downsides to consider:

Higher Deposit Requirements

Investment properties usually require a higher deposit if you’re with a bank as the mortgage lender. However, buying new builds or using second-tier lenders may lower that barrier.

No KiwiSaver Scheme Withdrawal

You won’t qualify for the KiwiSaver First Home Buyer withdrawal if you’re buying an investment property first.

Of course, you can use KiwiSaver to help with your first home deposit, but you must live in it for six months. So some investors will decide to buy a property and use their KiwiSaver, then turn it into a rental after six months.

What if you don’t use your KiwiSaver for your first property? Well, you still won’t be able to use it when you eventually buy a home to live in.

That’s because you’ll already own a property, and generally you can only use your KiwiSaver if you’ve never owned a property before.

You’re Still Paying Rent

Yes, you’ll be paying rent. But that’s offset by the income your investment property earns and any tax benefits — ideally, anyway.

Managing a Property Remotely

If your investment property is located far from where you live, managing it can seem daunting.

Like any rental property, your investment may experience periods where it’s vacant, impacting your cash flow.

Professional property management services are your best friend here. They handle tenant placement including vetting, rent collection, maintenance, and all the day-to-day hassles, allowing you to enjoy the returns without the stress of being a hands-on landlord from afar. We can connect you with reputable property managers in your chosen investment locations.

Your Next Property Can Be More Challenging

Expanding your property investment portfolio as a rentvestor might proceed at a somewhat measured pace due to the dynamics of usable equity. Lending regulations, particularly loan-to-value ratio (LVR) restrictions set by the Reserve Bank, often mean that the amount you can re-borrow against an investment property once settled is less than the initial loan amount. This necessitates a greater focus on organically building equity through repayments before accessing funds for further acquisitions.

These rules change frequently but usually favour owner-occupied properties.

Loss of Control As a Tenant

Opting to rent means less control over your housing. Your landlords can raise rent or request you vacate, perhaps to sell the property. This instability can be a significant drawback, particularly for families who desire stability. Unexpected moves can be disruptive and stressful.

That’s why rentvesting often appeals to young and mobile professionals.

Is Rentvesting Right for You?

This isn’t about settling for less; it’s about being smart and deliberate. It’s about recognising the traditional path isn’t the only path, and for many, it might not even be the most efficient or logical one. Rentvesting is a testament to the power of adaptability and the wisdom of separating lifestyle choices from investment decisions.

In an increasingly mobile world, where career opportunities and personal preferences often lead us to different corners of the country (or even the globe), the rigidity of traditional homeownership can feel like an anchor. Rentvesting offers a flexible and dynamic alternative, allowing you to embrace the opportunities that come your way without sacrificing your long-term financial goals.

The Bottom Line: Rentvest with Confidence

Rentvesting is a compelling option in today’s mobile, modern world..

You don’t need to wait for perfect conditions. You just need a strategy that fits your goals, your lifestyle, and your means.

Ready to explore how rentvesting could help you build wealth while living on your terms? Book your complimentary initial consult to weigh up your options, understand the trade-offs, and take a confident step forward — toward a future you’ve designed yourself.

The interesting part – at Become Wealth, half of our financial advisers are rentvestors!