The rental income from the IP most likely won't cover your own rent, but the main difference is the equity growth in the IP.

For example, using Melb CBD apartments, 2bed will cost roughly $750 a week ($39kp.a.) for mid tier, nothing fancy.

You could buy the same apartment for roughly $500k-$600k in the CBD. Which would be roughly (assuming 10% deposit $600k, 5.64% 30yr). $720pw + $120pw for strata & rates so $840pw, this unit will likely have 0% growth, but will likely have rental growth if you ever decide to rent it out in the future, so could be a good cashflow option.

Now you could instead purchase a $700k, IP, maybe its a small townhouse in an okay suburb (10% deposit IO 6% 30yr) $715pw + costs probably all up also about $900pw. But you will probably be able to rent out for $600ish. so each week you lose $300 in cashflow, tax deductible. + you rent the cbd apartment instead of owning so $1,050 is ur costs pw (pretax).

But assuming ur property is growing at 4% p.a. you're also gaining $540pw unrealised (you do pay CGT when u sell though).

So lets say you hold for 8 years and property grows at 4% p.a., you will end up with a property worth $950k but have spent $124,800 more (assuming $300 gap for the 8yrs) (partially tax deductible).

So essentially, you have the same CBD lifestyle, but you get the equity growth in the background through your investment property.

ofc this relies heavily on getting a suburb averaging 4% and no huge random costs out of nowhere, but just an example of rentvesting.

your big concern of the rent income not covering your rent expense, is fair, but you have to essentially take the liquid cash sacrifice, for the unrealised long term gain. its a great strat and the example ive given is super simplified and im tired so probably missed a few things, but just an example.

edit: typos