Rentvesting, honestly
Renting where you want to live and buying where the numbers work is a legitimate strategy, not a compromise. It is also assessed differently, priced differently and taxed differently from buying a home, and several first home buyer benefits change or disappear. Worth understanding fully before committing rather than halfway through.
How lenders see it
As an investment purchase, because that is what it is. Investment lending is generally priced above owner-occupier lending, deposits can be higher, and the rental income you expect is discounted for vacancy and costs rather than counted at face value. Your own rent, meanwhile, counts as an ongoing expense in the assessment, which is the part rentvestors most often underestimate. Both sides of the equation are read conservatively.
What happens to the first home buyer benefits
This is the decisive question for most people. Stamp duty concessions for first home buyers generally require you to live in the property for a defined period, and the government guarantee scheme is designed around owner-occupation. Buying an investment first can mean forgoing those benefits, and it may affect whether you are still treated as a first home buyer later. The rules are specific and worth checking against your circumstances rather than assumed either way.
Where rentvesting genuinely works
When your preferred suburb is years out of reach and a different market is not. When your work or life requires you to be somewhere you cannot afford to buy. When you want to be in the market while you decide where you want to live permanently. In each case the strategy is solving a real problem rather than being clever.
The honest cautions
You are a landlord, with the obligations, vacancies and maintenance that involves. You are exposed to a market you may not know well, which is why buying somewhere purely because it is cheap rarely ends well. And you are giving up benefits designed for owner-occupiers. None of that makes it wrong; it makes it a decision that deserves the full arithmetic, including tax, which is your accountant's territory.
What changes when you rentvest
Four differences from buying a home to live in.
Generally priced above owner-occupier lending, with deposit requirements that can be higher. Investment lending.
Expected rental income is discounted for vacancy and costs, and the discount varies by lender.
It counts against you in serviceability, which surprises people who assumed it was neutral.
Duty concessions and the guarantee scheme generally require owner-occupation. Check before deciding, not after.
Weighing rentvesting against waiting?
Charles can run both paths on your numbers, including what you would give up on the schemes.
Rentvesting questions
Can I still be a first home buyer if I rentvest?
It depends on the specific benefit and on your circumstances. Stamp duty concessions and the guarantee scheme generally require you to live in the property, so buying an investment first commonly means forgoing them, and it can affect your status for later purchases. The rules are specific enough that this should be checked properly rather than assumed.
Does my rent count against my borrowing power?
Yes, as an ongoing living expense, which is the part most rentvestors underestimate. You are being assessed on carrying a mortgage and paying rent simultaneously, with the expected rental income discounted. That combination is why rentvesting borrowing figures are often lower than people expect.
Is investment lending more expensive?
Generally yes, both in rate and sometimes in deposit requirement. The gap varies between lenders and over time. It is one of several reasons the arithmetic should be run properly rather than on the assumption that a cheaper suburb automatically makes the numbers work.
Should I buy where I can afford or wait to buy where I want?
That depends on how far away your preferred suburb is, what waiting costs you in rent, and whether you would be comfortable owning a property you do not live in. There is no general answer. What there is, is arithmetic, and it is worth doing before committing either way.
What about the tax side?
Investment property carries deductions, capital gains consequences and sometimes land tax, none of which are lending questions. They can materially change whether rentvesting works for you, and they belong with your accountant rather than your broker.
Related guides
General information only, not credit or financial advice. Professional lending policies, eligible occupations and loan-to-value thresholds vary by lender and change over time. Eligibility is confirmed against current lender policy in an assessment; nothing on this page is a promise that any lender will approve any application.
Run both paths before you choose one.
Twenty minutes with Charles: what rentvesting would cost you, what you would give up, and what waiting would cost instead. Free, no credit check.
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