In 2025, should you rent or buy your home? Discover the power of rentvesting—living where you want while investing in multiple properties to grow wealth. This real-life example breaks down the financial benefits of renting over buying, revealing how smart property investments can accelerate your journey to financial freedom. Don't miss this eye-opening analysis on achieving your dream lifestyle while building a strong portfolio.
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I am absolutely convinced that rent vesting as a strategy in 2025 is going to be your gateway to getting to Financial Freedom quick up.
If you're thinking about getting into the property market and not sure how you're going to do it, the key is to get this book: Retire Filthy Rich Real Estate.
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Thank you again for supporting the journey and becoming the number one bestseller across multiple categories and even spending some time in the top 100 best sellers on Amazon across all of Australia.
Now, let's jump into something that is quite sensitive but, honestly, at this point, I've been talking about it for 4 years.
The reason I've been talking about this so passionately is because I do exactly this, which is, for a long period of time, I lived at home, and I was fortunate because my parents didn't get me to pay board or rent, and I'm super grateful for that.
During that time, it didn't mean I just sat at home. I took up multiple jobs, and that's pretty much the story around building a portfolio. I learned why financial literacy is so important. So, I used to work really hard, use that money to, yeah, enjoy life and travel and whatnot, but I also used to use that to go and buy property. Real estate investing for me was using leverage to grow out a foundation portfolio.
About 4 and 1/2 years ago, I decided to move out of home, and I started renting with my partner.
Now, the first thing you realise is:
The second thing you think is:
However, more importantly, I decided to rent even though we could afford to go and buy a house. Now, I know that there's a logical reasoning for this and an emotional reasoning for this, and I'm going to share with you both.
Most people are purchasing real estate and getting on the property ladder because they want to build wealth. Sure, there's security, and we all want that. We want a place to live and know that no one's going to kick us out, and then you also want home ownership.
I was born here, and I've lived my entire life here, so I understand the Australian dream and fascination with having your own property. It's a large reason why I'm so emotional about owning my own house.
Rentvesting. If we had the option of buying a place, we could probably afford something, but would it be the dream house? No, it definitely wouldn't, because the dream house costs 7 or 8 million dollars, to be honest, and what we could have afforded at that time was probably about 1.5 million dollars' worth.
I'm not saying 1.5 is something to just say, "Well, that's a house." I still think that you would have got something amazing at that time.
Now, fast forward to where we're at now. I could tell you now, we've lived in a couple of different areas in Sydney, and I thought those areas were the ones that I wanted to live in forever. Once I rented there, I realised I didn't want to live there anymore.
What would have been a really sucky situation is if we had bought there because we would have bought and then been house-proud and gone, "Now we can't change." From going and buying a house, owning a home, and then potentially going and renting somewhere, that's just all emotion speaking.
I'm going to showcase with you a real-life example of my life right now with the numbers and why it still makes sense for a lot of people, including you, to go and rent instead of buy something.
Now, by the end of this article, you're probably going to realise that logically it still makes sense, but the emotions are still greater, and you’ll think: I still want certainty and less volatility, so I want to go buy my own home, and that's completely fair. But I urge you to stick all the way through this article because I think if you keep an open mind, there might be one of you guys that converts and understands that the logical side of things makes a lot of sense.
I hear day in, day out people arguing, people stressing, and people complaining about not liking their job. But the fact is that you have created an environment where you've become stuck because of the choices you've made financially, and one of those decisions is buying a house.
Let's use the example that I'm in right now.
I moved into this penthouse a couple of years ago, so it's been about two years, and my rent started at $1,200 a week. Now it's gone up to $1,320 a week.
It's also going to go up again in about three months' time to $1,450 a week but that's a future Ravi problem.
Now, what we can see is that rental increases will happen, and that's just part of the cycle that we're in.
However, being curious, I wanted to know, how much did it cost the owner to actually buy this place? Because we've all heard it before: By renting, you're paying someone else's mortgage, and they're getting wealthy off your dollar. So, I thought, let's figure it out.
The property that I lived in at the time was worth about $2 million. Now it's worth probably about $2.2 million, so about 10% growth. But it was actually purchased for about $2.2 million. If you think about the performance over the last five years, it's pretty much been dogs*t.
Now let's figure out what upfront costs we would have in order to go and purchase this property, and would we even be able to afford it?
Assuming that we had the borrowing capacity, a 10% deposit on a $2 million property is $200,000.
In addition to that, I would have to pay stamp duty, which would be about $100,000, and conveyancing, your inspections, and things like that, which would be about $5,000. So, all up, I'm having to put up about $305,000 to just get in the property.
Here comes the first hurdle: Do I have enough money to actually purchase the place?
I can tell you now, I had enough of a deposit to go and do that, but I chose to do something else instead. You see, with the $305,000, I would then control one asset—one asset that I would live in, and that would be fantastic. But then I also still have to make the repayments, right?
Let's take a look as to what my repayments would actually look like.
Now, knowing that we're putting a 10% deposit down, it would mean that we would have a $1.8 million loan on this house. I'm going to go interest-only and put our own interest rate.
What we can see is that we have a $9,000 per month repayment to be made, and that's interest-only. So, if you know what the difference is, it means that my actual balance of $1.8 million is not going to be touched. It's going to be just interest repayments that I have to make.
And this is how you would calculate the real difference between renting as well as actually owning a home. Because if I own this home and I'm only paying the interest, that would be the equivalent of me just paying rent because interest is just wasted money anyway. So, $9,000 a month is what I would have to pay.
In addition to this, I would have insurances as well as council rates and water rates. So, that on top means maybe I'm paying about $9,500.
Now, I live in a penthouse, and it's two levels, so it's a really nice property. It's got really good city views, and yes, it's fantastic. But I would then also have to pay strata, which would be an added cost. I can tell you, it's quite high in this building. But let's just say for the purpose of this example, it's going to cost about $1,000 per month for me to just own this property.
We already know over the last two years it's grown by 10%, so about 5% per year, which is okay. But how does this compare to me living here? Because the owners of this property don't even live in Sydney.
In fact, they don't even live in Australia—they're from China. And so, what they did was they bought the property, and they left it empty. They then said: Well, actually, we might want to earn some income here. So, we've been renting it out knowing that they have no intentions to ever actually live in Australia.
This means, if we wanted to, we could live here for the next 5, 10, 15 years, and I'm pretty sure they're not going to kick us out. We will have to face the issue of an increasing rental amount though.
In this scenario, we've got the $300,000; it's locked up in here, plus the $1.8 million worth of borrowing capacity is now locked up in here as well.
This means I can no longer purchase any other property. I'm hoping that this property grows, and at $2 million going up by 10%, it means that it's grown by $200,000 over the last two years, which, again, is a pretty good result.
Therefore, if my repayments are $10,000, what does it look like equivalent to me actually renting the place?
Now, in year one, my rent was $1,200 a week. So, $1,200 a week times 52 weeks equals $62,400. If I divide that by 12, it means that monthly I'm paying $5,200 in year one.
We can already see the big difference here, which is $10,000 versus $5,200.
However, benefit of the doubt, knowing that my rent has increased—it's actually $1,320 now—we're going to times that by 52, divide that by 12, and it means $5,720.
If you add some additional costs, it comes to $6,000 because we want to make round numbers. Easy maths is not the concern here.
This means a potential saving of $4,000 per month. That is wild because that is almost $50,000 in the year that I get to potentially save by living in the exact same place and taking the emotions out of it, suggesting: Hey, I can live here. I get all the benefits of living here. I just don't have to own it.
Now, where it gets really crazy is the $1.8 million worth of borrowing capacity and the $300,000. Because now, by renting, I keep both. I don't have to spend my $300,000, and I don't have to take out loans of $1.8 million.
Now, knowing me, I love debt, so what I did was I used the $300K as well as the borrowing capacity, and I went and purchased four properties.
I go ahead and purchase those four properties at an average price point of $450,000, which means I now control about $1.8 million worth of real estate. That $1.8 million has been growing far greater than the 5% this property's been growing.
In fact, it's growing at about 15%. But even if we said worst case, it was growing at 10% a year, that means $360,000 because year one was $180,000.
Year two, although it was compounding, we're still going to say, for the sake of simplicity, another $180,000, which means almost $400,000 worth of equity was being built in my portfolio.
The best part of all of this is that the amount that was taken out of my pocket was actually less than me just simply owning this one property. I get the choice of being able to sell one property or sell a couple of properties.
Even though my rent here has increased, those properties have tenants, and their rents have increased in those areas too. Those areas have increased a lot faster than the area that I'm living in right now.
Now, you can see the clear difference: I've now got a portfolio which I have choice with versus me going out there, putting all of my funds into this one asset that I hope is going to grow.
The numbers may not be applicable to you because you might be paying less or more rent, and maybe the property you want to purchase is worth a lot less value. But if the numbers are similar and you go through this exercise, you're going to realise for yourself that logically, you would be better off actually rent-vesting in 2025 and for the next couple of years.
I'm not against buying your dream home, trust me—I definitely want mine as well. But I would much rather kick the can down the road, invest wisely, have the ability to go and enjoy life, travel, and not have the stress of going: Hey, if I can't afford the property, it means I can't travel. I can't live my best life.
In fact, I just have to live on two-minute noodles because I said I wanted this house. Instead, what I could do is have the portfolio. The rental income is taking care of all of the expenses, and after a couple of years, it will start paying me more, which will eventually allow me to go and hold my dream property a lot easier.
The equity that my portfolio generates will allow me the deposit I need to go and purchase my dream home as well, and I won't have to change my lifestyle significantly.
I hope you guys have enjoyed this article and it's provided some insights around how you should actually view this a little differently.
Catch you guys on the next one.
Thanks, guys!
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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