As soaring property prices and housing crises are reported as far and wide as the UK, Spain, and the coastal United States, “pity the poor renter” has been a common refrain, amid calls for a new finance model for those who pay extortionate rents yet cannot access a (frequently cheaper) mortgage loan. Yet a new brand of empowered tenant may be emerging, according to reports that “rentvestment” is the latest financial hack.
“Rentvestment” is the process of buying a property, not to live in, but to rent, while one continues to rent a house to live in oneself. The case of 34-year-old Charlie Clark was reported in the UK’s Metro. Clark owns a “nice family home” on the Isle of White, where it was more affordable for him to get a mortgage and get on the property ladder than it would have been in London, where he actually still lives, in a rental property, while letting the island home out to other short-term tenants on Airbnb.
@billynormanfp Rent-vesting, how it works #rentvesting #propertyinvesting #financialadvice #financialadviser ♬ original sound – Billy | Financial Adviser
Marc von Grundherr, director at London real estate agent, Benham and Reeves, told Metro that the rentvestment sector is small but “growing” and is a phenomenon “driven largely by the lack of affordability in many desirable areas, alongside a greater acceptance of renting as a long-term lifestyle choice among younger generations.”
This is echoed by reporting by US global outlet CNBC, which wrote about the trend back in 2024, noting its springboard effect for access to the housing market, while quoting experts who warned of its potential drawbacks. Negatives range from rental prices and mortgage rates that can go up as well as down leaving one unable to cover debts, to underestimating the costs involved in managing a property, insuring it, and maintaining it correctly, and even potentially needing to hire a property manager to do that.
Other pitfalls of the strategy include failing to plan sufficiently for periods where the property remains empty, leaving one exposed to all the mortgage and maintenance costs with no rental income. Not to mention, forgetting to take into account potential changes in regional or national market regulations and tax liabilities, over which one has no control.
@nomafinance Have you considered rent-vesting? Comment below
♬ original sound – Stan 🙂
Changing tax liabilities caused much consternation among Airbnb owners in Wales recently, where changes to the number of days rental required per year in order to maintain one’s beneficial tax status led to warnings of a structural crisis in the tourist accommodation sector.
Still, rentvestment is an approach to personal finance that appears still to be gaining traction. Small investors (with up to 10 investment properties) composed the majority (62.6%) of investor purchases in the first quarter of 2024, according to Realtor.com data – which represents more small investor activity than at any time since records began in 2001.
Those figures do not separate out the small investors who rent the place where they live while letting somewhere else out to other people, and those who own the place where they live while, while doing the same. For the latter, of course, there are often second-home tax implications, that the former can avoid.
In any case, the media’s fascination with so-called rentvestors and the risks they are taking on, perhaps reflects a conservative (and ageist view) that it is somehow indulgent to have a rental property portfolio before one is a “proper homeowner” oneself – just as it is indulgent in some people’s eyes, to enjoy avocado toast before one gets a mortgage.
