Rentvesting means you rent where you want to live and buy an investment property somewhere else. For some renters in coastal suburbs such as Quinns Rocks, it can be a way to stay near the coast while still getting a foot on the property ladder.
It can work well over the long term. It also comes with trade-offs, especially after recent tax changes. We would rather you hear those now than find out later.
What Is Rentvesting and Is It Right for You?
Rentvesting is renting your own home while owning an investment property elsewhere, funded by an investment loan. It suits people who value lifestyle or location now but want to build wealth through property over time.
If you rent in a coastal suburb like Quinns Rocks, you might find that buying in the same area is out of reach or not what you want. You might prefer to buy somewhere else that suits your budget. The trade-off is that you pay rent on your own home and the costs of owning a property. You also don't get the main residence CGT exemption on the investment property, which is a tax rule worth discussing with your accountant.
Rentvesting suits people who are comfortable with a long time frame and have steady income. It is a poor fit if you would be stretched to cover the loan when the property sits empty for a few weeks.
How Lenders Assess an Investment Loan When You Rent
Lenders assess an investment loan on your income, your debts, your living costs and the rent the property is expected to earn. Renting your own home does not stop you borrowing, but your rent counts as a living expense.
Banks and other authorised deposit-taking institutions must test whether you could still afford the loan if the interest rate were 3.0 percentage points higher than the loan's actual rate. APRA also expects lenders to count no more than 80 per cent of expected rent, to allow for gaps between tenants. Individual lenders set their own policies on top of this, including how they treat rental appraisals on a new purchase.
The quickest way to see where you stand is to check your borrowing capacity before you look at properties. That way you search within a range you know a lender can support.
Loan to Value Ratio, LMI and Your Deposit
The loan to value ratio (LVR) is your loan divided by the property's value. Borrowing more than 80 per cent of the value generally means paying Lenders Mortgage Insurance (LMI).
The 80 per cent mark is not a legal limit. It is the point where LMI is generally required, and each lender sets its own caps above it. LMI is paid by you, not the lender, and its cost depends on the loan amount and the LVR. A bigger deposit lowers your LVR and can reduce or remove this cost, but it also means more of your savings are tied up in one property. If you already own some property, equity may be able to fund part of the deposit, though that increases your total debt.
Our investment loans page explains how we compare lenders on LVR limits and features.
Interest Only or Principal and Interest: A Worked Example
Interest only means you pay just the interest for a set period, usually one to five years. Principal and interest means each repayment also reduces the loan. Interest only gives lower repayments now but a higher repayment later.
As an example, consider a couple renting in Quinns Rocks who want to buy an investment property with a loan of $500,000 over 30 years. They ask us whether interest only is the smarter choice. We use an illustrative rate of 6.75% p.a. for both options.
- Principal and interest over 30 years: about $3,243 a month.
- Interest only for 5 years: about $2,813 a month.
- After 5 years, switching to principal and interest over the remaining 25 years: about $3,455 a month.
The interest-only option saves roughly $430 a month at first. But the loan balance does not fall, and the later repayment is about $212 a month higher than the 30-year principal and interest figure. Interest only also does not lift how much you can borrow. Lenders assess it on the shorter remaining term, so the borrowing limit can be lower, not higher.
The couple decide they can comfortably afford the principal and interest repayment. They choose it, and keep their savings in an offset account for flexibility. Their loan reduces from day one, and there is no jump in repayments to plan for. Another household with irregular income might reasonably choose differently. These figures are illustrative only, so use our mortgage repayment calculator to test your own numbers.
Negative Gearing Has Changed for Established Properties
Negative gearing is when your rental costs, including interest, are more than the rent you receive. The rules on using that loss against your wages now depend on when you buy and what you buy.
Losses from residential investment properties held at 7:30pm AEST on 12 May 2026, including those under contract, can still be deducted against other income. Losses from eligible new builds bought after that date can also still be deducted against all income. For established residential properties bought after that time, from the 2027-28 income year net rental losses can only be deducted against other residential property income, including residential capital gains. Excess losses carry forward. Properties bought between 12 May 2026 and 30 June 2027 can use the current rules until 30 June 2027 only.
In practical terms, a rentvestor buying an established property now should not rely on a loss reducing the tax on their salary beyond that date. Interest on the loan remains deductible where the property is rented or available for rent, along with costs such as council rates, insurance and management fees. Only the interest part of a principal and interest repayment is deductible, not the whole repayment. Please speak with your accountant about your own situation, because tax outcomes are never certain.
Costs and Risks Rentvestors Should Plan For
The main risk of rentvesting is that you carry two sets of housing costs while the property may sit vacant or need repairs. Planning a cash buffer protects you from having to sell at a bad time.
Own your numbers before you buy. Allow for periods without a tenant, maintenance, insurance and property management. If the property is an apartment or townhouse, check the body corporate fees, because they reduce your return. Remember that your own rent continues no matter what happens to the investment.
It also helps to review the loan every so often. If your circumstances or the market change, refinancing may let you move to a lender with a lower rate or more suitable features, though it can involve costs such as discharge fees.
Rentvesting works best as a long game. We prefer to understand where you want to be in ten or twenty years before we recommend a loan, and we will tell you plainly if waiting is the wiser call. Call one of our team or book an appointment at a time that works for you, and we can work through your numbers together at no pressure to commit.
Frequently Asked Questions
What is rentvesting?
Rentvesting is renting the home you live in while owning an investment property elsewhere. It suits people who want a certain lifestyle or location now while building wealth through property over time.
Does interest only increase how much I can borrow?
No. Lenders assess interest-only loans on principal and interest repayments over the shorter remaining term, so the borrowing limit can be lower. Interest only lowers early repayments but leaves the loan balance unchanged.
Do I need LMI on an investment loan?
LMI is generally required when you borrow more than 80 per cent of the property's value. Lenders set their own limits above that level, and a larger deposit can reduce or remove the cost.
Can I still use negative gearing as a rentvestor?
It depends on the property and when you buy it. Established properties bought after 12 May 2026 face restrictions on using losses against wages from the 2027-28 income year, so speak with your accountant.
