There’s nothing more frustrating than to dream of owning your home, get excited when you fall in love with a property, only to have your finance specialist utter those heartbreaking words, “You can’t afford it!”

Many are left feeling deflated and resigned to renting for the rest of their lives.

However, others determined to enter the property market are not accepting ‘no’ for an answer and have discovered a so-called secret backdoor to getting into the property market.

It’s called rentvesting.

Rentvesting is a scenario in which you rent your place of residence and purchase an investment property.

While this is not necessarily a solution for everyone, depending on your circumstances, it could be just the ticket you need to get into the property market sooner.

I’m not going to go through every pro and con of rentvesting. Rather, my intention is to introduce the concept to those who want to own their home and have been turned away due to lack of affordability. If you’re at a loss as to how you can own your home, this could be the answer.

Let’s look at 10 reasons why this could be right for you.

1. It could get you into the market sooner. Maybe you have a decent deposit saved up but you still can’t afford your dream home. By re-jigging the numbers, you could remain renting and purchase a lower priced property and receive healthy rent. This could make all the difference to go from a decline to an approval.

2. Live where you want to. OK, maybe the dream home is a bit out of your reach now, especially if you live in Sydney, but you could be better off renting a beautiful home without having to pay the plus-sized mortgage that goes with it. Maybe you need to live close to the city for work. This enables you to be figuratively ‘living beyond your means’ without the price tag. While rent yields are much lower in Sydney due to skyrocketing prices, by renting you can live in a property that is way beyond your means to purchase.

3. Live and own in two different states. Depending on your lifestyle, you might need to live in one state for work but want to buy in another. It might be because that’s where your family is and where you want to end up in the future. Purchase prices and rents differ across different states and regions. Rentvesting can enable you to map out the perfect plan for your current and future situations.

An added bonus here is that you may be eligible for the ‘temporary absence rule’. What is the rule? Well, if you move out of your home and rent it out, under this law, the property may still be treated as your principal place of residence. This could extend for a period of up to six years which could be handy, especially if you have to move overseas. If you decide to sell the property within this time frame, you may be exempt from paying CGT if you profit from the sale. You are also exempt from paying capital gains on the income generated from the leasing of the property.

However, if you’re moving out of your home and renting it out, you’re going to need somewhere else to live. You will need to elect one of the two dwellings as your principle place of residence and a tax will be applied to the sale of your non-primary property. Speak to your accountant about how this might relate to your personal circumstances.

4. Chase the higher rental yields. When buying an investment property, many will tell you to buy without emotion and look at the numbers as you may never live there. If you’re happy renting and living in the right suburb, you’re not limited to where you might buy as an investor. Your property expert will be more than excited to show you where the best rental returns are happening on their stock lists. By achieving top rental income, this could push your affordability over the line and start you on your journey as a property owner.

5. Property investors receive tax benefits. As an investor, you are eligible for tax benefits such as depreciation, deductible interest and investment property expense deductions on your tax return. Make sure you engage an excellent accountant who can set you up to maximise your benefits. The difference can amount to thousands of dollars each year.

6. You may be able to still claim some expenses on your rented residence. If you are a business owner or professional who requires a home office, you may be able to claim ‘home office expenses’ if you meet the criteria of a separate office or dedicated work space. This may include a portion of your rent and utilities, office expense items, purchases, depreciation and even your car space.

7. Work with the situation you are in now as circumstances may change later. While there is often a debate between buying for maximum rent return versus capital growth, your current circumstances might very well favour higher rent return as a rentvestor rather than capital gains. Remember, you only pay capital gains tax when you sell the property and realise the profit. Your circumstances may change in the future and you may wish to live in this property for a period. You could be eligible for a CGT discount of up to 50 per cent but speak to your accountant about the capital gains which are payable on increased property value upon the sale. They can assist you to create a plan and advise where and how you can minimize this.

8. Avoid multiple real estate agent entry and exit costs. By rentvesting, you can conveniently eliminate the heavy costs of purchasing and selling, such as stamp duties, agent fees, legal fees etc. This is especially handy if your work requires you to be moving home a lot or if you plan to make a sea change or two.

9. Start on your pathway to multiple properties. If you buy well and either save a deposit or build equity in your purchases property, this could enable you to purchase another investment property. If you are achieving exceptional rental income while curbing your personal rent costs, you could afford to buy another investment property sooner than you think.

10. Your rentvested properties could buy you your own home. If you wind the clock forward several years, you may find life has been good to you. You and your partner may have received pay rises, saved money and gained equity in your property(s). Remember the time when you doubted you could ever afford to buy a property? Now that your circumstances have changed, you might be ready to buy your own home.

John J Maxwell, senior mortgage and finance consultant, Cocalex Consulting