Rentvesting vs buying a home

How rentvesting works

Instead of buying a home to live in, you keep renting and buy an investment property. The rent from your tenant helps cover the loan, and the interest and property costs may be tax deductible.

Possible advantages

• Live in the area you want without paying its purchase price.
• Buy in a location with better rental yield or growth prospects.
• Interest, property costs and depreciation may be tax deductible, which can reduce your tax if the property makes a loss (negative gearing). From 1 July 2027 negative gearing on residential property is limited to new builds. Properties held at 7.30pm AEST on 12 May 2026 are exempt. For other properties a loss can only reduce income from residential property, and any unused loss is carried forward.
• A less expensive property means a smaller loan and lower repayments.

Trade-offs to consider

• You still pay rent, which usually rises over time.
• An investment property does not get the main residence exemption from capital gains tax. From 1 July 2027 the 50% discount is replaced by cost base indexation and a minimum tax of 30%, for the part of the gain made after that date.
• Land tax may apply to the investment, depending on the state and the land value.
• Buying an investment first can mean you no longer qualify for first home buyer stamp duty concessions and grants later.
• You have less security of tenure where you live.

What to compare

Look at the full cash flow of each option each year. That means loan repayments, property costs, land tax, the rent you pay and the rent you receive, and the effect on your tax. Lenders also assess the two options differently because rental income is shaded and your own rent is counted as an expense.

Getting advice

The right choice depends on your income, where you want to live and your long-term plans. Speak to your accountant about the tax position and use our calculator to compare the out-of-pocket costs of each option.