Rentvesting means you rent where you want to live and buy an investment property somewhere else. For many couples it feels like a smart middle path, and it also comes with its own rules, costs and trade-offs.
If you and your partner are renting in Melbourne and wondering whether to buy an investment first, this guide covers the money questions to settle before you talk to a lender.
What Is Rentvesting and Who Is It Suited To?
Rentvesting is renting your own home while owning an investment property that someone else rents from you. It suits couples who want to live in a particular suburb or lifestyle now, but would struggle to afford buying there.
The trade-off is that you carry two sets of costs. You pay rent on your home and you fund the investment loan, plus holding costs like insurance, council rates and repairs. If the investment rent doesn't cover those costs, the gap comes out of your pay. Our rentvesting page covers the basics, and our guide to buying your first investment property covers the purchase side.
How Do Lenders Count Rent When You Apply for an Investment Loan?
Banks generally count only part of the rent you expect to receive. APRA's guidance says sound lending policies include a minimum 20 per cent haircut on expected rent, so no more than 80 per cent is counted.
That haircut allows for periods when the property sits empty. It is not about management fees or repairs, which still come out of your budget. Lenders also tend to rely less on a rental appraisal for a new purchase than on actual rent already being paid. Each lender sets its own rules on what rental evidence it accepts.
Banks also test whether you could still afford the loan if the rate rose by 3.0 percentage points. At our illustrative rate of 6.75% p.a., that means being assessed at 9.75% p.a. Your own rate will depend on your deposit size and lender. Use our borrowing capacity calculator to get a feel for your limit as a couple.
Interest Only or Principal and Interest: What Changes in Your Repayments?
An interest-only investment loan has lower repayments at first, but you owe the same amount when the interest-only period ends and the repayments then jump. It also does not lift how much you can borrow.
As an example, consider a couple borrowing $500,000 at an illustrative 6.75% p.a. They are weighing up two options over a 30-year term.
- Principal and interest from day one: about $3,243 a month.
- Interest only for five years: about $2,813 a month.
The interest-only option saves them roughly $430 a month for five years. When it ends, they still owe $500,000 and must repay it over the remaining 25 years. At the same 6.75% p.a., the repayment becomes about $3,454 a month, around $211 more than if they had started with principal and interest.
They decide the lower early repayments help while they build their savings buffer, and they accept the higher repayment later. Lenders assess interest-only loans on the repayments you'd face over the shorter remaining term, so the loan size they could get was no larger than on principal and interest. You can test your own numbers with our interest only mortgage calculator or read more on interest only loans.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at FinancePath today.
Negative Gearing Has Changed: What Couples Should Know
Negative gearing rules now depend on when you buy and what you buy. Many couples starting out will be buying after the cut-off date, so the rules below are worth understanding first.
Negative gearing means your rental costs, including loan interest, are higher than your rent. For properties held at 7:30pm AEST on 12 May 2026, losses can still be deducted against other income like your salary. Eligible new builds acquired after that date can also keep this treatment.
For established homes bought after that time, the rules change from the 2027-28 income year. Net rental losses can then 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.
The tax picture matters when comparing a new build with an established property. Capital gains tax is also changing from 1 July 2027, when the 50 per cent discount is replaced by indexing the cost base to inflation, with a 30 per cent minimum tax on real gains accruing from that date. Only the interest part of a repayment is deductible, never the principal. Your tax outcome depends on your circumstances, so speak with your accountant before you commit.
Investor Deposits and Lenders Mortgage Insurance
Borrowing more than 80 per cent of the property's value generally means paying lenders mortgage insurance (LMI). It is a cost to you, but it protects the lender, not you.
The 80 per cent line is not a legal limit. It is where lenders and insurers usually step in, and each sets its own policy above it. A smaller deposit means a bigger loan, higher repayments and less room if rates rise or the property is empty for a while. Bigger loans also make that rate buffer test harder to pass. If you're weighing this up, see how low deposit loans and no LMI loans work and what they cost.
Why Your Own Home Plans Still Matter
A couple who rentvests now may still want to buy a home to live in later. Think about how the investment loan will affect that plan.
The loan counts as a debt when a lender assesses your next application, so it reduces what you can borrow for a home. Banks also treat investor loans as higher risk than owner-occupier loans, and that can influence pricing, depending on the lender. Our investment loans page explains how we compare options across lenders for couples at this stage.
If buying your own home is the main goal, ask whether rentvesting first helps or delays it. There's no single right answer. It depends on your savings, income and how long you'd happily rent.
Call one of our team or book an appointment at a time that works for you at FinancePath. We'll look at your numbers together and talk through whether rentvesting suits the two of you.
Frequently Asked Questions
How much rent do lenders count on an investment loan?
APRA's guidance expects lenders to count no more than 80 per cent of expected rent. Each lender sets its own rules on what rental evidence it accepts.
Does an interest-only loan let us borrow more?
No. Lenders assess interest-only loans on repayments over the shorter remaining term after the interest-only period, so the loan size is not higher. Repayments rise when the interest-only period ends.
Can we still negatively gear a rentvesting property?
It depends on when you buy and what you buy. Established homes bought after 12 May 2026 face limits from the 2027-28 income year, while eligible new builds keep the current treatment. Ask your accountant about your situation.
Do we need LMI to buy an investment property?
LMI is generally required when you borrow more than 80 per cent of the property's value. Each lender and insurer sets its own policy, and the cost is paid by you.
