Buy first home or investment property first? - NAB
How to choose between a first home, investment property or rentvesting
If you’re comparing your options, it can help to start with the main difference between each path.
- Buying your first home means purchasing a property you plan to live in. This may appeal to people who want stability, a place of their own and access to first-home buyer support if they’re eligible.
- Buying an investment property first means purchasing a property to rent out rather than live in. This may appeal to people who are focused on rental income, long-term capital growth or building an asset before buying a home to live in.
- Rentvesting means continuing to rent where you live while buying an investment property somewhere else. Some people consider this when they want to enter the property market but can’t yet afford to buy in the area they want to live in.
There isn’t one pathway that works for everyone. What matters most is understanding how each option could affect your cash flow, lifestyle and longer-term plans.
What changes financially when you choose one path over another?
The property path you choose can affect your upfront costs, ongoing expenses, loan type, tax position and cash flow.
Upfront support and incentives
If you’re buying your first home to live in, you may be eligible for government support depending on your circumstances and where you buy. This could include first-home buyer grants, government schemes or stamp duty concessions.
These types of supports are generally designed for owner-occupiers, not investors. If you’re buying an investment property first, you may need to rely more heavily on your deposit, borrowing capacity and ability to manage the ongoing costs.
Ongoing costs and risks
All property owners need to plan for ongoing costs. These can include council rates, insurance, maintenance and repairs.
Investment properties can also involve additional costs such as property management fees, landlord insurance, tenant-related wear and tear, and periods without rental income. These costs can affect how affordable the property is over time.
Repayments and cashflow
Owner-occupier loans often have different interest rates and repayment settings compared with investment property loans. If you buy a home to live in, you’ll usually rely on your income to cover your repayments and ongoing property costs. Interest rates for owner occupier loans tend to be lower than investment property loans, making the former more affordable.
If you buy an investment property, rental income may help cover some of the costs. However, it may not cover everything. There may be times when you need to cover a shortfall, such as if expenses increase, the property is vacant, or rental income is lower than expected.
Tax treatment
Tax can work differently depending on whether the property is your home or an investment.
A home you live in may be exempt from capital gains tax when you sell, provided it qualifies as your main residence. However, you generally can’t claim tax deductions for home loan interest, utilities or maintenance costs on the home you live in.
With an investment property, rental income is generally taxable. You may also be able to claim deductions for some property-related expenses. Capital gains tax may apply when you sell, although a discount may be available if you’ve owned the property for more than 12 months. That said tax rules are complex and can change with time. That’s why it’s worth checking official government information or speaking with a qualified tax adviser if you need guidance for your situation.
Examples of how different property paths can fit different situations
These examples show how people may think about the different pathways. They’re not recommendations, but they can help you understand the kinds of trade-offs involved.
“I’m tired of renting and want a place that feels like mine”
Some people focus on buying a first home because they want more stability in day-to-day life. Owning the place, you live in can mean more certainty about where you’ll stay, more freedom to make the space your own, and a clearer path toward owning your home over time.
This pathway may be more relevant if living in your own home matters more to you than buying property purely as an investment.
“I want to live close to work, friends or family, but can’t afford to buy there yet”
Some people compare rentvesting with buying a first home when they want to stay in an area that suits their lifestyle, but buying there feels out of reach.
Rentvesting can mean continuing to rent where you want to live while buying a property in a different area that may be more affordable. This can help some buyers enter the property market while keeping flexibility in where they live.
“I want to start building wealth through property before buying a home to live in”
Some people look at buying an investment property first when their focus is on building an asset, generating rental income, or aiming for long-term capital growth before buying a home to live in.
This path can look different financially because investment properties come with their own costs, risks and tax rules. It can help to understand what you may need to cover if rental income doesn’t meet all the expenses.
“I could buy now, rent it out first, and move in later”
Some people buy a property with the idea of renting it out first, then living in it later if their plans change.
If you’re comparing this option, it can help to think about whether the property would still suit your future needs. For example, consider the location, size, layout and whether it could work for your lifestyle if you decided to move in later.
Questions to ask yourself before you choose
Before deciding which path to explore, it can help to think about what you want from property now and in the future.
Ask yourself:
- Do I want to own the place I live in, or am I comfortable renting for longer?
- Am I relying on first-home buyer support to make buying possible?
- Could I manage the costs if rental income dropped or the property was vacant for a period?
- Is my focus lifestyle stability, flexibility, long-term investing, or a mix of these?
- Would the property still suit my plans if my circumstances changed?
- Have I considered the upfront and ongoing costs for each option?
- Do I understand the tax differences between owning a home and owning an investment property?
Your answers can help you compare the pathways more clearly and decide what further information or support you may need.
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How to go from renter to home buyer
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.
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