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Is Rent Money Dead Money? Renting vs Saving for a House

September 29, 2022
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6 mins


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Renting vs saving for a house

In a world full of inflation, rate rises and soaring property prices, the age-old debate of renting vs saving for a house is more apparent than ever for first home buyers. Many are quick to point out that rent money is ‘dead’ money, but this isn’t necessarily the case.

Read on if you’re unsure whether you should be renting or saving for a house.

Renting vs saving for a house

Once upon a time, it was commonly assumed that owning a house was the ‘Great Australian Dream’. However, homeownership isn’t everyone’s idea of a dream come true. As property prices continue to reach new heights, it’s becoming increasingly more challenging for younger people to break into the property market. The problem here is that they’re being told that rent money is ‘dead’ money.

Unless they are willing to live with their parents until they have enough saved to buy (and let’s face it, this isn’t always the most appealing option), renting seems to be the only other option. What works for some might not work for others. 


Renting gives you the kind of property freedom you wouldn’t get with a mortgage. However, you also run the risk of overbearing landlords or creepy housemates. Here are some of the key points to consider when choosing to rent:

Benefits of renting: 

Frees up your savings  

While the costs of renting are by no means small, renters don’t have to worry about the cost of stamp duty, lender’s mortgage insurance or large deposits. This means you have more money freed up to invest or spend elsewhere. Renting also means you won’t have to pay for council rates, water rates, or body corporate fees.

Fewer maintenance costs

As you don’t own the house, there aren’t as many upkeep costs that you’ll need to deal with. While you’ll need to maintain the property, you won’t need to dig into your pocket if the oven breaks or the heating stops working. However, if you cause damage to the property, the cost is often deducted from your bond.

Greater flexibility

If you move around a lot for work or aren’t sure where you’d like to live, renting provides more freedom. As you’re not tied to the property, you can leave whenever you want (within your lease agreements). While you can rent out or leave a property you own, it’s much more hassle than if you’re renting.

Cons of renting:

Less security

You don’t own the property, which means you’re at the mercy of your landlord. Those who have experienced it know that renting can be highly unpredictable. Rent costs can be increased, maintenance issues might never be tended to, and, commonly, you won’t be allowed to bring your furry friend into the place. 

Limited freedom

Another downside of not owning the property is that you can’t design the place to your liking. From painting the walls to drilling holes to hanging pictures, there is often a clear line of what you can and can’t do.

Renting vs saving for a house


Owning your own home is a dream for many Australians. However, this dream is slowly slipping out of reach thanks to an increasing cost of living. When tossing between buying and renting, here are some things to consider.

Benefits of saving for a house:

Stability and freedom

Owning your own property means you can do whatever you like to make it feel like home. You can paint, landscape the yard and renovate without needing permission (except for significant structural changes that require council approval or if you’re part of a body corporate that has restrictions).

Also, unless you’re not making your mortgage repayments, owning a home gives you a greater sense of security. You won’t be kicked out because the owner wants to sell or see a hike in rent prices ‘just because’. Interest rates can fluctuate, meaning your payments can change, but you can opt for a split, fixed or variable rate.

Read our blog about fixed, variable and split rates to learn more.

Chance to build equity

When you buy property, there’s a possibility that your property may increase in value over time. Price increase in the property market often corresponds to a rise in the value of your asset. It’s important to remember that equity isn’t guaranteed when you buy property, which means you shouldn’t rely on this when you’re considering selling or withdrawing equity from your home.

Negatives of saving for a house:


There’s no easy way to say it – owning a house is expensive. Your mortgage repayments may work out to be similar to your rental prices, but there are other costs to include too. Stamp duty, lender’s mortgage insurance, and conveyancing fees are only some of the costs associated with buying a house – and that’s before you own the property! Ongoing costs that you’re responsible for can include council rates, body corporate fees, water bills, maintenance etc.

To learn more, read our blog on the hidden costs of buying a property. 

House prices may decrease in value 

Just like you might accumulate equity in your home, there is also a chance that your home may decrease in value. This can result from poor renovation decisions or a drop in the property market. 

How much money should I spend on rent? 

The answer to this question will vary for everyone depending on your financial circumstances. A common way to estimate how much money you should spend on rent is to aim for around 30 per cent of your gross monthly income (the money you make before tax deductions). For example, if your gross monthly income was $2,000, you might aim to spend no more than $600 per month on rent.

While this is one way you can calculate how much you should be spending on rent, it’s not always the most accurate, especially with the rising cost of living. If you’re unsure, enlist the help of a trusted financial professional who can devise a strategy that suits you.

Saving for a house deposit while renting 

Saving for a house while renting is no easy feat. It requires motivation, hard work and a strict budget. If you’re renting but looking to buy a home, talk to a financial advisor about what strategies you can implement. Many of these strategies involve cutting unnecessary spending, looking for high-interest savings accounts and setting goals. Our expert team are here to help guide you and give you personalised advice if this is something you’re thinking about doing.

What is ‘rentvesting’?

Lastly, rentvesting is something becoming increasingly popular. Rentvesting refers to investing in one property while simultaneously living in another rental property. Property Investment Professionals of Australia (PIPA) found that 63 per cent of investors would consider rentvesing. This way of living is great for those who may like the appeal of living in a particular suburb but may not be able to afford to buy property there. By purchasing property elsewhere and renting it out, your tenant should subsidise your mortgage. Investing may be a good way to increase cash flow and allow you to access various tax benefits.

However, there are potential risks involved with this strategy. High costs, capital gains tax and property price decreases are all things to keep in mind before choosing to rentvest. Be sure to talk to an experienced broker before opting for this strategy.

Rentvesting isn’t exclusive to the property market. The less discussed version of rentvesting is to invest in shares and managed funds, which can result in higher long-term gains and provide much greater liquidity. Again, this is something you should discuss with an experienced broker prior to using this strategy.

Renting vs saving for a house is a tough decision – especially with a consistently rising cost of living. If you’re looking for advice on whether to buy, rent or even rentvest, reach out to one of our experienced mortgage broker team members today.

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