69. FI case study: Rentvest vs. ETFs - Aussie Fire

In this episode of the Aussie FIRE Podcast, hosts Dave from Strong Money Australia and Hayden from Pearler sit down with a listener named Steve, a self-employed sports coach in his late 20s, to dissect a complex property and investing dilemma. Steve and his partner bring in a combined six-figure income and aggressively invest $50,000 annually into ETFs, but Steve finds himself feeling financially "trapped" due to a shared-equity property scheme. Two and a half years prior, Steve purchased a one-bedroom Melbourne apartment using the Victorian Homebuyer Fund (VHF), which means the government holds a 25% interest-free equity stake in his home. While the interest-free structure has been a massive financial boost, the rigid rules of the scheme dictate that Steve cannot legally buy or rent another property under his name until that 25% government stake is completely paid back. Because Steve and his partner plan to have children in the next three to four years and will inevitably outgrow their current apartment, he is faced with the stressful prospect of having to liquidate a large portion of his $200,000 ETF portfolio just to buy out the government and unlock his mobility.  To solve this, Dave strongly recommends that Steve avoid touching his compounding ETFs and instead focus on refinancing the apartment through a standard bank within the next six months. Because the property has experienced minor capital growth and Steve has steadily paid down his primary mortgage, his loan-to-value ratio is hovering very close to 80%, a threshold where standard banks would comfortably take over the loan, effectively paying out the Victorian government and freeing Steve’s name from the scheme's restrictions. Both Dave and Hayden advise Steve not to rush this process, pointing out that an interest-free loan is a rare financial "free kick" that he should string along for the next two to three years until children are immediately on the horizon. Once the government is paid out via refinancing, the hosts suggest that Steve transition the highly rentable apartment into a long-term investment property and adopt a "rentvesting" strategy.  Hayden and Dave reframe the traditional stigmas surrounding renting, explaining that renting a larger family home is often tens of thousands of dollars cheaper annually than the interest and holding costs of buying a house of equivalent size in the same market. Furthermore, Hayden highlights that being a wealthy renter with an extensive ETF portfolio eliminates the typical pain points of leasing, as Steve would have the liquidity to easily absorb moving costs or offer multiple months of rent upfront to secure premium properties. Steve notes that his partner is entirely on board with rentvesting and adds that because she has never owned property, they also have the future flexibility of using her first-home buyer grants down the line. Ultimately, the trio concludes the conversation by emphasizing that true financial independence is not about obsessively maximizing net worth at the cost of lifestyle, but rather about protecting household cash flow and maintaining the flexibility to choose time with family over a suffocating mortgage.

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Episode 69. FI case study: Rentvest vs. ETFs

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Hosts

Hayden Smith

Dave Gow

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