Priced out of the suburb you want to live in? You don't have to give up on buying

Abstract sculptural artwork for the JRW Finance article on rentvesting and buying an investment property in a different suburb to where you live

I get asked about this a fair bit, especially from people renting in a suburb they love but can't get anywhere near affording to buy into.

It's called rentvesting. You keep renting where you actually want to live, and buy an investment property somewhere more affordable instead. Rather than waiting years to save enough for a home in a suburb that just keeps getting more expensive.

Here's the thing though. Lenders look at a rentvesting application a bit differently to a standard owner-occupier purchase.

Your own rent still counts as a living expense in your serviceability assessment, same as it would for anyone renting. That does eat into your borrowing power a bit.

On the investment side, most lenders only count a portion of the expected rental income, often somewhere around 75 to 80% of the gross rent, to allow for vacancy and running costs. A handful of lenders will count more than that. Which lender you go with can genuinely change how much you're able to borrow for the exact same property.

There's a trade-off people don't always think about early enough. Buying an investment property first usually means giving up first home buyer grants and stamp duty concessions, since those generally require you to actually live in the property. In most states, that's not something you get to go back and claim later either.

Tax treatment is different too. Negative gearing and capital gains tax work differently for an investment property than they do for your own home. Worth a proper chat with a tax professional before you commit to the strategy, not after.

And if you're weighing this up, the loan structure on that first purchase matters more than most people expect. It affects how easily you can add a second or third property down the track.

I wrote up the full breakdown on the site, including how lenders actually shade that rental income and where the first home buyer trade-off really bites: https://jrwfinance.com.au/rentvesting-explained-renting-here-buying-somewhere-else/