What is rent-vesting and is it right for you?

Buying your first property in the Philippines often comes down to a hard trade-off: the areas you most want to live in are usually the ones you can least afford to buy in. Rent-vesting is a strategy that gets around that — and it's becoming a popular way for Filipinos to start building wealth in property without putting their life on hold.

What is rent-vesting?

Rent-vesting is a term for people who rent where they want to live, but buy a property somewhere they can afford to own one — then rent that property out to a tenant whose rent helps pay the home loan. It's a good option for anyone who wants to get started in the property market without sacrificing their lifestyle or where they live.

How does rent-vesting work?

Say you want to live close to work in Metro Manila, where the home loan repayments on the kind of property you'd want to own come to around P42,000 a month. But the rent for a similar place in that same area is only P28,000 a month. That leaves you roughly P14,000 a month spare to invest.

Rent-vesting works best when there's a noticeable difference between the cost to buy and the cost to rent in the same area. The catch is discipline: for the strategy to build wealth, you have to actually invest that monthly saving rather than spend it.

Why do people rent-vest?

Imagine you want to live in the inner city but don't have the borrowing power to buy a property there. Rent-vesting gives you the best of both worlds. You can afford to rent in an area that suits your lifestyle, while putting your money to work by buying a property elsewhere and renting it out.

You can buy that investment property anywhere in the Philippines — even in a completely different location from where you currently live. The rental income should largely cover your home loan repayments each month, and you still get to live where you want.

The pros of rent-vesting

• Lifestyle. Rent-vesting lets you live in your preferred location, even one that would be far too expensive to buy into.
• Flexibility. Selling a home you live in to move somewhere else can be difficult and slow. Renting where you live means you can move around without that problem, while still owning property elsewhere.
• An earlier start. You get onto the property ladder sooner, instead of waiting years to save enough to buy in your dream suburb.

The cons of rent-vesting

• Less security. A landlord can ask you to move out of the home you're renting, which brings uncertainty as a tenant.
• Less control. It's harder to personalise a home you rent the way you could if you owned it. You don't have the freedom that property owners enjoy in the place they actually live.

So what's the best option?

Whether rent-vesting beats simply buying the home you live in depends on your financial goals, your financial situation and your personal circumstances. When you're weighing up the two, it's genuinely worth seeking advice from an accountant or financial professional who can help you understand the long-term impact of the decision.

And once you've decided to buy — whether it's an investment property to rent out or the home you'll live in — the next question is how to finance it. That's where Nook comes in.

Thinking about rent-vesting? Find out what you can borrow for an investment property in about 3 minutes, or chat to a live Nook agent any day from 9:00am to 9:00pm. It's completely free — Nook compares 20+ banks and does the entire application for you.

Check if I qualify →   Chat to an agent

How Nook helps you finance a rent-vesting property

Nook is the Philippines' original and award-winning mortgage broker. Rather than approaching banks one at a time to finance your investment property, you're matched to the lender most likely to approve you from a comparison of 20+ banks — and a dedicated Nook loan consultant then runs your whole application for you, so you never deal with a bank directly.

• The entire home loan application is handled for you, online — no branch queues and no chasing the bank yourself.
• You're matched to the bank most likely to approve you, at the sharpest rate for your profile.
• Your consultant prepares and lodges the forms, gathers your documents and follows up at every step.
• It's 100% free — the bank pays Nook a commission once your loan is released, not you.

If you're considering buying a property — to rent-vest or to live in — and want to understand your financing options, you can pre-qualify with Nook in just a few minutes, and every part of the service is free for home loan borrowers.