Want to buy a home? Rentvesting' may be for you

You've been living and working in Calgary and bought a nice, affordable home. You fall in love with someone living in Toronto, or find your dream job in Vancouver.

- LESLEY-ANNE SCORGIE

"Rentvesting" allows homeowners to build equity while living somewhere more affordable, Lesley-Anne Scorgie writes.

Now, you're moving to a place where homes are unaffordable and renting is the only option if you want to live there.

A light bulb goes on - you'll rent out your place in Calgary (your primary residence) in an effort to keep building equity, then rent something that works with your budget in your new city.

That's "rentvesting." A riff off this example is the flip scenario-renting in an expensive real estate market and purchasing a residential home elsewhere for considerably less money that you set up as an investment property from the get-go.

The reason the rentvesting strategy is so popular is because owners get to build equity, and in some cases where the homes are less expensive and the rents are high, positive cash flow is achieved as another source of income.

Though rentvesting seems like a fresh new Reddit trend, it's not. Historically, it's one of the most common ways investors make their foray into real estate investing. Let's break it down.

Who is the rentvesting strategy for?

It's suitable for people who have flexibility in their budget, and have subsequently saved a good-sized down payment (or have put down a good amount of money on a lessexpensive home whereby the mortgage payments are manageable).

Typically these folks earn fairly well, have a solid credit score and can qualify for a modest mortgage.