Do you know rentvesting could unlock property sooner?

Rentvesting lets you buy an investment property in an affordable location while continuing to rent where you want to live.

The approach works when purchasing your ideal home in Malvern feels financially out of reach right now, but you want to start building equity and securing a foothold in the property market. Rather than waiting years to save a deposit for an owner-occupied property in this suburb, you purchase an investment property elsewhere and claim the tax benefits and capital growth while renting close to work, family, or the lifestyle you prefer.

Why Malvern residents consider rentvesting

Malvern sits in one of Melbourne's most tightly held pockets, with period homes, tree-lined streets, and proximity to Caulfield Junction, Glenferrie Road shopping, and top-tier schools. Median property values reflect that demand. Many professionals and young families want to live here but lack the deposit or borrowing capacity to purchase in the suburb at this stage of their lives.

Rentvesting shifts the equation. You secure an investment loan for a property in a suburb with lower entry costs, start paying down debt, and let rental income cover part of the mortgage. You continue renting in Malvern or nearby, keeping access to the amenities and location that matter most without overextending financially.

How rentvesting affects your borrowing capacity

Lenders assess your ability to service an investment loan differently than an owner-occupied loan. Rental income from the investment property is included in your application, though lenders typically apply a shading factor and calculate only 80% of the expected rent to account for vacancies and management costs.

If you're paying rent yourself, that cost is also factored into your liabilities. The net effect on borrowing capacity depends on the rental yield of the investment property and the cost of your own accommodation. Consider a buyer renting a two-bedroom apartment in Malvern East for $2,400 per month and purchasing a two-bedroom unit in Reservoir where monthly rent is $1,800. The lender would include around $1,440 of rental income (80% of $1,800) in the borrowing capacity calculation, alongside the $2,400 rental expense and the proposed loan repayments.

Lenders also apply the serviceability buffer, currently 3.0 percentage points above the loan product rate, to ensure you can manage repayments if interest rates rise. The debt-to-income lending limit, active from 1 February 2026, restricts the proportion of loans an ADI can write to borrowers with a total DTI ratio of six times or greater, though this applies separately to owner-occupier and investor lending portfolios.

Loan structures that suit rentvesting

Variable rate loans offer flexibility if you plan to make extra repayments from bonuses or pay increases, while fixed rate loans lock in repayments for a set term, which can help with budgeting in the early years. A split loan divides the loan amount between fixed and variable portions, giving you partial rate certainty while retaining some capacity to pay down the variable portion without incurring break costs.

An offset account linked to your investment loan reduces the interest charged by offsetting your savings balance against the loan amount. The interest saved on an investment loan is effectively additional after-tax income, since investment loan interest is tax-deductible. If you're paying rent and servicing an investment loan, the offset account becomes a practical way to manage cash flow and reduce borrowing costs without locking funds into the loan itself.

Interest-only repayments are another option. The loan is structured so you pay only the interest component for an initial period, typically one to five years, keeping repayments lower and maximising tax deductions in the early years of ownership. Once the interest-only period ends, the loan reverts to principal and interest repayments. This structure suits buyers who expect their income to increase or who plan to sell or refinance within a few years, but it does not reduce the loan balance during the interest-only term.

Tax treatment for investors who rentvest

Investment property expenses, including loan interest, property management fees, council rates, insurance, and maintenance, are deductible against rental income. Where expenses exceed income, the loss can be offset against other income such as salary, reducing your overall tax liability. This is commonly referred to as negative gearing.

For investment properties held at 7:30pm AEST on 12 May 2026, losses continue to be fully deductible against all income, including wages. For established properties purchased after that date, losses are deductible only against other residential property income from the 2027-28 income year onward. New builds purchased after 12 May 2026 retain the ability to deduct losses against all income.

When you eventually sell the investment property, capital gains tax applies. For gains accruing before 1 July 2027, the 50% CGT discount applies if you've held the property for more than 12 months. From 1 July 2027, the discount is replaced by cost base indexation and a 30% minimum tax rate on capital gains accruing from that date, though new builds retain access to both the discount and the indexation method as a choice at disposal.

Using government schemes as a rentvestor

The Australian Government 5% Deposit Scheme and Help to Buy are both limited to first home buyers purchasing a property they intend to occupy as their principal place of residence. Rentvesting does not qualify for these schemes because the property is treated as an investment from the outset.

State-based first home buyer grants and stamp duty concessions in Victoria also require the property to be owner-occupied. The Victorian FHOG of $10,000 applies only to new homes valued up to $750,000 that the buyer will live in. Stamp duty relief, including the full exemption on properties valued up to $600,000 and the concession up to $750,000, requires the buyer to move in within 12 months and reside there for at least 12 continuous months. If you're rentvesting, none of these benefits apply to your investment property purchase.

You can, however, access the First Home Super Saver Scheme to build your deposit. The FHSS Scheme allows you to make voluntary contributions into super and release up to $50,000 toward a home deposit. The scheme applies to first home buyers, and the property you eventually purchase with the released funds must be owner-occupied. If you're rentvesting now with the intention of purchasing your own home later, you can continue contributing to the FHSS Scheme and use those funds when you're ready to buy a property to live in.

What happens when you're ready to move into your own home

Many rentvestors plan to transition into owner-occupation within a few years. When that time comes, you have several options. You can sell the investment property and use the proceeds as a deposit for an owner-occupied home. You can retain the investment property and apply for a second loan to purchase your own home, though your borrowing capacity will be affected by the existing investment loan and any shortfall between rental income and investment loan repayments. Or you can move into the investment property and convert it to your principal place of residence, though this means relocating to the area where you initially invested.

If you choose to hold both properties, lenders will assess your ability to service two loans simultaneously. Rental income from the investment property will still be included in the calculation, shaded to 80%, and both loan repayments will be tested at the serviceability buffer. Depending on your income and expenses, you may find that your borrowing capacity for the owner-occupied loan is lower than expected, or that you need a larger deposit to make the numbers work.

Another consideration is capital gains tax. If you sell the investment property to fund your owner-occupied purchase, CGT applies to the gain accrued during the period you held it as an investment. If you move into the investment property and establish it as your principal place of residence, you can potentially access the main residence exemption for the period you live there, though the exemption does not apply retrospectively to the period it was rented.

Choosing the right investment property

The property you select as a rentvestor should generate rental income and have realistic prospects for capital growth over the period you plan to hold it. Proximity to employment hubs, public transport, schools, and shopping centres tends to support tenant demand. Properties that appeal to a broad tenant pool, such as two-bedroom units or three-bedroom houses in established suburbs, are typically easier to rent and hold value more consistently than niche properties.

You'll also need to factor in ongoing costs beyond the mortgage. Property management fees typically range from 5% to 8% of the monthly rent, depending on the area and the level of service. Landlord insurance, council rates, body corporate fees for units, and periodic maintenance all reduce your net rental income. Vacancy periods, even short ones, can affect cash flow, so it helps to hold a buffer in your offset account or savings to cover any shortfall.

Lenders mortgage insurance may apply if your deposit is less than 20% of the property value. LMI is a one-off cost added to your loan or paid upfront, calculated on a sliding scale based on your loan amount and LVR. While it increases your borrowing costs, it allows you to enter the market sooner rather than waiting years to save a larger deposit. Some lenders also offer LMI waivers for certain professions or under specific loan products, so it's worth reviewing your options before committing to a loan structure.

Call one of our team or book an appointment at a time that works for you. We'll walk through your income, expenses, and goals, compare home loan options across lenders, and structure a loan that fits your situation as a rentvestor in Malvern.

Important: This does not constitute tax advice and it is recommended to seek advice from your Accountant or Financial Planner for your individual circumstances.