Investing Investment property loans, while you keep renting where you love
Love where you rent, but can't buy there? You don't have to leave to start owning.
You can own property without leaving the suburb you rent in. Rentvesting means buying an investment where the numbers work and staying where you live. The catch: the 5% Deposit Scheme is for owner-occupiers only, investment loans can cost more, and buying an investment first may rule you out of first home concessions later.
Your first home to live in
- 5% deposit
- $37,500
- Stamp duty
- $0
An investment first
- 10% deposit
- $75,000
- Stamp duty
- $27,937
Illustrative. Established property in Sydney. The investment column assumes a 90% loan, before lender fees and any mortgage insurance. Later, buying your own home after the investment, the NSW first home duty exemption would no longer apply.
What is rentvesting?
Rentvesting means renting where you want to live and buying an investment where the numbers work. The tenant's rent helps pay the loan, and you keep the suburb, the school or the commute you've built your life around.
Many renters I talk to love where they live. They just assume owning means leaving. It doesn't have to, but it does change which rules apply to you. That is the part to get right before you sign anything.
Rentvesting or buying a home to live in: what changes?
Neither is the right answer for everyone. These are the differences that move your real number.
| Buy a home to live in | Rentvest | |
|---|---|---|
| Government deposit schemes | May apply, from 5% or 2% | Don't apply |
| First home stamp duty concessions | May apply, depending on state and price | Don't apply, and may be lost for later |
| Deposit lenders usually want | From 5% | Often 10% to 20% |
| Interest rate | Owner-occupier rate | Often higher |
| Your rent | Stops | Continues, and counts as an expense |
| Rental income | None | Part of it counts towards borrowing |
| Where you live | Where you can afford to buy | Where you choose to rent |
How do lenders read an investor's income?
If you're on a salary and buying one investment, most lenders read it in a similar way. If you're self-employed, already own one or two, or rely on rental income from more than one property, they don't.
- Rental income is shaded. Many lenders count about 70% to 80% of the expected rent.
- Your own rent is an expense. It reduces what you can borrow, compared with buying to live in.
- Existing loans are tested at a higher rate. Every loan you hold is assessed with a buffer.
- Interest-only has a cost. Lower repayments now, but the debt doesn't fall, and the rate is often higher.
What I do, and what I don't
I work out what you could borrow, what the deposit and stamp duty would be, and the catch on each option. I don't pick properties, predict growth or give tax advice.
Whether investing suits you is a question for your accountant or a licensed financial adviser. Once you know where you want to go, I find the lenders whose policy fits.
When may buying a home first be the better answer?
- You'd qualify for the 5% Deposit Scheme and first home duty relief now, and you'd lose both by investing first.
- Your rent is high enough that stopping it changes your budget more than a tenant's rent would.
- You'd want to move into the property within a few years anyway.
How I work The Pace Plan
The same three steps, whichever door you came through.
- Step 1
Get your real number
The deposit, the stamp duty and the fees for your state and price.
- Step 2
See every way in
Government schemes first, and the catch on each, in writing.
- Step 3
Set your pace
Choose the option and the timeline, then pre-approval, offer and settlement, timed to your lease, with a plan to pay it off.
Schemes first, every time. I tell you the catch. If waiting is the better answer, I'll say so.
FAQ Questions clients ask
Can I use the 5% Deposit Scheme to buy an investment property?
No. The scheme is for owner-occupiers only, and you must move in within 6 months of settlement and keep living there while the scheme supports the loan.
If I buy an investment first, can I still get first home buyer help later?
Probably not. The 5% Deposit Scheme needs you not to have held property in Australia for 10 years, and an investment counts. In NSW, the first home stamp duty concession is only for buyers who have never owned. Work out both paths before you choose.
How much deposit do I need for an investment property?
Many lenders want 10% to 20% plus costs for an investment. Below 20%, lenders mortgage insurance usually applies, and some lenders cap investment loans lower than home loans. The deposit you may need depends on the lender and the property.
Do lenders count the rent as income?
Yes, but usually not all of it. Many lenders count around 70% to 80% of the expected rent to allow for vacancies and costs. Your own rent is counted as an expense, which is why rentvesting can borrow less than buying to live in.
Are investment loan rates higher than home loan rates?
Usually, yes. Investment loans and interest-only repayments often carry a higher rate than owner-occupier principal and interest loans. I compare the real cost over the time you plan to hold the property.
Should I buy in my own name, a trust or a company?
That’s a tax and structure question for your accountant. Lenders treat each structure differently, so once you and your accountant have chosen, I find the lenders whose policy fits it.
Get your real number in one 30-minute session.
Then build at your pace.
So you could keep the life you love and still own property.