What rentvesting actually means
Rentvesting means buying an investment property in an area you can afford while continuing to rent in the suburb where you want to live. You build equity in a property you own while keeping the flexibility to rent near work, family, or in an area like Epping where buying at the current median might stretch your borrowing capacity too far.
The approach works when rental income from your investment property covers most or all of the loan repayment, and you're comfortable renting where you live for a few more years. It gives you a foothold in the market without forcing you to move to an outer suburb or wait another three years to save a larger deposit.
How lenders assess a rentvesting application
Lenders treat your rentvesting loan as an investment loan, not an owner-occupied loan. That changes two things immediately. Interest rates on investment loans sit slightly higher than owner-occupied rates, usually by 0.10% to 0.30%. Lenders also apply a higher serviceability buffer when calculating how much you can borrow.
When you apply, the lender adds your current rent to the new loan repayment and tests whether you can service both. They'll include 80% of the expected rental income from your investment property as income, which helps offset the loan cost. If you're renting in Epping and buying an investment property in a regional centre where yields are higher, that rental income becomes a significant part of your borrowing capacity.
Consider a buyer who earns $85,000 and pays $450 a week to rent a two-bedroom unit near Epping Plaza. They're looking at a two-bedroom unit in a regional Victorian town where the purchase price sits at $420,000 and the rental yield is $380 a week. The lender adds $450 a week in rent to their existing expenses, then adds 80% of the $380 weekly rental income (so $304) back as income. The buyer's net position improves, and they can service the loan without needing to move out of Epping.
Loan structure and offset accounts for rentvestors
A variable rate loan with a linked offset account gives you the most flexibility when rentvesting. You can park your savings in the offset account, reduce the interest charged on the investment loan, and keep those funds accessible if you need them for other purposes. Because the loan is for investment purposes, the interest you pay is tax deductible, but only on the portion of the loan balance not offset by your savings.
Some buyers use a split loan structure, fixing part of the loan to lock in repayments and leaving the rest on a variable rate with an offset. That works if you want certainty on part of your repayment but still want access to redraw or offset features. Interest-only repayments are another option, keeping your monthly outgoings lower while you continue renting and building equity through capital growth rather than principal repayments.
If you're planning to buy your own home in Epping within the next few years, keeping your investment loan interest-only and your savings in an offset account keeps your deposit liquid. When you're ready to buy your own place, you pull the offset funds out for your owner-occupied deposit and switch the investment loan to principal and interest if needed.
How the negative gearing changes affect rentvesting purchases now
From the 2027-28 income year, losses on established investment properties bought after 12 May 2026 can only be offset against income from other residential properties, not against your salary. If you buy an established unit now and the rental income doesn't cover your loan repayment, rates, and other costs, that loss can't reduce your taxable income from your job. You can carry the loss forward and use it against future property income, including capital gains when you sell.
Properties you buy before 12 May 2026 are grandfathered, meaning losses remain fully deductible against all income. New builds purchased after that date are also exempt, so losses on a newly constructed property remain fully deductible regardless of when you buy.
For someone buying an investment property while renting in Epping, this changes the numbers. A property that runs at a $3,000 annual loss used to reduce your taxable income by that amount. Now, if it's an established property bought after 12 May 2026, you carry that $3,000 forward and deduct it from rental income or capital gains later. The property still builds equity, but the immediate tax benefit is deferred.
Borrowing capacity and the debt-to-income limit
From 1 February 2026, lenders can only write up to 20% of their new investment loans to borrowers with a total debt-to-income ratio of six times or more. That limit applies at the lender level, not to you personally, but it does mean some lenders may decline an application if your total debt is six times your income and they've already hit their quarterly cap.
If you earn $85,000 and want to borrow $510,000 for an investment property, your DTI ratio is exactly six. If you already have a car loan or personal loan, that existing debt gets added to the $510,000, which might push you over the threshold with some lenders. In that scenario, a broker can place your application with a lender who still has capacity under the 20% cap, or structure the loan differently to bring the ratio down.
Your borrowing capacity for an investment loan while renting also depends on how much rental income the property will generate. Higher yields give you more serviceability, which is why some rentvesting buyers look at units in regional Victoria or Queensland where rental returns sit above 5%, compared to Epping where gross yields on units typically sit closer to 4%.
The owner-occupied purchase that follows
When you're ready to stop renting and buy a home to live in, you'll be applying for an owner-occupied home loan while still holding your investment property. Lenders will assess your ability to service both loans at the same time. They'll include 80% of your investment property's rental income as income, and they'll include the full loan repayment on that property as an expense.
If your investment property is neutrally geared or positively geared by that point, the numbers work in your favour. If it's still running at a loss, that loss reduces your borrowing capacity for the owner-occupied purchase. Some buyers switch their investment loan to interest-only before applying for their owner-occupied loan, lowering the monthly repayment on the investment property and freeing up more capacity to borrow for their own home.
You can't use the Australian Government 5% Deposit Scheme or Help to Buy once you already own an investment property, because both programs are limited to first home buyers who haven't owned property before. Stamp duty concessions in Victoria also require you to be purchasing your first home. That's why some buyers time their rentvesting purchase carefully, either buying the investment property first and accepting they'll need a 20% deposit later for their owner-occupied purchase, or buying their owner-occupied home first and renting it out for a period before moving in.
How capital gains tax applies when you sell
When you sell your investment property, you'll pay capital gains tax on the profit. For properties held for more than 12 months, you previously received a 50% discount on the taxable gain. From 1 July 2027, that discount is replaced with cost base indexation and a 30% minimum tax rate on gains accruing from that date.
Under the new rules, you index your purchase price by inflation and only pay tax on the real gain above inflation. If you bought a property for $420,000 and inflation over your holding period was 15%, your indexed cost base becomes $483,000. If you sell for $550,000, your taxable gain is $67,000 rather than $130,000. The minimum tax rate of 30% applies to that indexed gain.
If your investment property is a new build, you get to choose at the time of sale whether to use the 50% discount or the indexed cost base method, whichever gives you a lower tax outcome. That makes new builds more attractive from a tax perspective if you're planning to hold the property long-term.
Your accountant will calculate the precise figures at tax time, but the change means the tax outcome on an investment property sale is now more predictable and more closely tied to actual purchasing power growth rather than nominal price increases.
Why the loan structure matters from day one
If you set up your investment loan with a clear separation between borrowed funds and your own savings, the tax position stays clean. Borrowed funds used to purchase the investment property generate deductible interest. Money you put into an offset account doesn't mix with the loan, so when you pull those savings out later for your owner-occupied deposit, there's no tax complexity.
Some buyers make the mistake of redrawing from their investment loan to fund their owner-occupied deposit. That redrawn amount is no longer borrowing for investment purposes, which means the interest on that portion isn't deductible. The ATO applies a purpose test to every dollar of interest you claim, so keeping your investment loan untouched and your savings in an offset avoids that problem entirely.
If you're planning to rent in Epping while building equity elsewhere, setting the structure up correctly from the start means you won't need to refinance or restructure later. A refinance is still an option if your circumstances change, but it's far easier to get it right the first time.
Call one of our team or book an appointment at a time that works for you. We'll walk through your income, your current rent, and the type of property you're looking at, then structure the loan so it supports both your rentvesting strategy now and your owner-occupied purchase later.
Frequently Asked Questions
Can I use the 5% Deposit Scheme if I'm rentvesting?
No. The Australian Government 5% Deposit Scheme is only available for first home buyers purchasing a home they intend to live in. If you're buying an investment property, you'll need a standard investment loan with a minimum 10% deposit, though most lenders require 20% to avoid lenders mortgage insurance.
How do lenders calculate rental income when I apply?
Lenders include 80% of the expected rental income from your investment property as part of your income when assessing borrowing capacity. They'll usually require a rental appraisal or evidence of comparable rentals in the area to verify the figure you provide.
Does rentvesting affect my ability to buy an owner-occupied home later?
Yes, but not negatively if the investment property is neutrally or positively geared. Lenders will assess your ability to service both loans, and they'll include 80% of the rental income from your investment property as income. If the investment property runs at a loss, that reduces your borrowing capacity for the owner-occupied purchase.
Can I claim the interest on my investment loan as a tax deduction?
Yes, interest on a loan used to purchase an investment property is tax deductible. However, if you use an offset account, you only claim interest on the net loan balance after the offset is applied. Keep your investment loan separate from personal funds to maintain a clean tax position.
What happens if I want to move into my investment property later?
You can move into your investment property and convert it to your principal place of residence. However, you'll need to notify your lender and switch the loan from an investment loan to an owner-occupied loan, which may involve a different interest rate. You'll also lose the tax deductibility on the loan interest from the date you move in.
