Rentvesting lets you own property and build wealth without living in it.
The approach suits Queensland buyers who want to enter the market but prefer renting in an area they can't yet afford to buy, or who value lifestyle flexibility over owning the home they occupy. You buy an investment property in a location with stronger rental yield or capital growth potential, claim the tax benefits, and continue renting where you choose to live. The strategy relies on structuring your borrowing correctly and understanding how the tax rules apply to properties acquired now and held into future income years.
How Rentvesting Differs from Buying Your First Home
When you buy as an investor rather than an owner-occupier, lenders assess the loan differently. You need a larger deposit, rental income is discounted when calculating serviceability, and the interest rate is typically higher. Lenders apply a serviceability buffer of at least 3.0 percentage points above the loan product rate and assess your total debt-to-income ratio. If your total borrowing is six times your gross income or more, the loan may fall within the investor DTI limit that applies to each lender's quarterly lending volume. The loan-to-value ratio and your borrowing capacity both matter more than they do for owner-occupiers at similar income levels.
Rental income is usually assessed at 80 per cent of the lease amount to account for vacancy and management costs. Consider a buyer earning $95,000 a year who wants to buy a unit generating $480 per week in rent. The lender includes $19,968 of that rental income in the serviceability calculation, not the full $24,960. If the buyer is also paying $550 per week to rent where they live, that $28,600 annual cost works against their borrowing capacity in a way that wouldn't occur if they were purchasing their own home.
Deposit and Upfront Costs for Investment Purchases
Most lenders require a minimum 10 per cent deposit for investment loans, though some will lend at higher loan-to-value ratios with Lenders Mortgage Insurance. At an LVR above 80 per cent, LMI becomes payable and the premium increases on a sliding scale as the LVR rises. Stamp duty is also payable at investment rates in Queensland, which are higher than the concessional rates available to first home buyers purchasing a principal place of residence. Unlike owner-occupiers, investors cannot access the First Home Owner Grant or other state-based buyer incentives when purchasing an established dwelling as an investment.
You also need to budget for settlement costs including legal fees, building and pest inspections, and lender application fees. If you are purchasing a unit, review the body corporate records and budget for the ongoing levies. These are deductible when the property is rented, but they still need to be funded from your cashflow.
Interest-Only Loans and Cashflow Management
Interest-only repayments are common for investment loans because they reduce the monthly outgoing and maximise the deductible interest expense. The loan reverts to principal and interest repayments at the end of the interest-only period, which is typically between one and five years. A longer interest-only period may be available, but under the prudential framework a loan is classified as non-standard where the LVR is greater than 80 per cent and the interest-only term exceeds five years or is not specified.
An interest-only structure suits investors who are negatively geared and want to claim the maximum tax deduction each year, or who plan to use surplus cashflow to pay down non-deductible debt such as a future owner-occupied home loan. If your goal is to reduce the investment loan balance over time, a principal and interest structure builds equity faster and reduces the total interest cost, though the repayments are higher and the annual tax deduction is lower.
Negative Gearing and the Tax Rule Changes
If you purchase an investment property now and settle before the end of the financial year, you can deduct all losses against your salary and other income under the current negative gearing rules. Properties held at 7:30pm AEST on 12 May 2026 are grandfathered, which means you can continue deducting losses against all income until you sell, regardless of when that occurs. Properties acquired after that date are subject to the new rules from the 2027-28 income year unless they qualify as eligible new builds.
Under the new rules, losses on established investment properties purchased after 12 May 2026 can only be offset against income from other residential properties, including capital gains. Excess losses carry forward to future years. Interest on the loan remains deductible, as do body corporate fees, council rates, insurance, property management fees, repairs and depreciation. The difference is that those deductions can only reduce income from residential property, not your wage or salary.
Eligible new builds retain full negative gearing. An eligible new build includes a dwelling constructed on vacant land or a development that increases the total number of dwellings on the site. A knock-down rebuild that replaces one dwelling with one dwelling does not qualify. Once a new build has been occupied for more than 12 months and is then sold, the next buyer loses access to negative gearing unless they also qualify under another exemption.
Capital Gains Tax Treatment from 1 July 2027
For gains accruing up to 30 June 2027, the existing 50 per cent CGT discount applies to investment properties held for more than 12 months. From 1 July 2027, gains on affected properties are taxed using cost base indexation and a 30 per cent minimum tax rate on the real gain. You index the cost base by CPI and pay tax only on the portion of the gain that exceeds inflation. The 30 per cent minimum rate applies where your effective tax rate on that indexed gain would otherwise fall below 30 per cent.
If you buy now and sell in a future year, the gain is split into a pre-1 July 2027 portion taxed under the old rules and a post-1 July 2027 portion taxed under the new rules. You can obtain a market valuation as at 1 July 2027 or apply an ATO apportionment formula. For eligible new builds, you can choose between the 50 per cent discount and the indexation method at the time of sale, depending on which delivers the lower tax outcome. Recipients of certain government payments including the Age Pension and Disability Support Pension are exempt from the 30 per cent minimum rate in any year they receive the payment.
Refinancing and Loan Features That Support Long-Term Holding
An investment loan should support your strategy over multiple years, not just at settlement. Look for features such as an offset account, the ability to switch between variable and fixed rates, and redraw on any principal repayments if you move to a principal and interest structure later. Offset accounts do not reduce the loan balance for LVR purposes under the prudential standard, but they do reduce the interest charged, which matters when you are cashflow negative.
If your circumstances change or you want to access equity for further investment, refinancing lets you restructure the loan without selling the property. Lenders reassess your serviceability and the property value at the time of refinance. You may also consider a loan health check to confirm the loan structure still aligns with your goals, particularly if you are approaching the end of an interest-only period or a fixed rate term.
Choosing the Right Location and Property Type
Rentvesting works when the property you buy delivers reliable rental income and has a realistic prospect of capital growth over the time you plan to hold it. Queensland investors often look at regional centres with strong employment drivers, or established suburbs within commuting distance of Brisbane where median prices remain below the inner-city equivalents. Vacancy rates, proximity to transport and schools, and the tenant profile all affect rental yield and the ease of keeping the property tenanted.
Units in well-maintained complexes near universities or hospitals can generate consistent rental income with lower maintenance costs than houses, though body corporate fees reduce net yield. Houses in family-oriented suburbs may deliver stronger capital growth over time but typically require a larger deposit and higher holding costs. The decision depends on your deposit size, borrowing capacity, and whether your priority is immediate cashflow or long-term wealth building.
Call one of our team or book an appointment at a time that works for you. We work with clients across Queensland to structure investment loans that align with your goals and help you understand how the current tax and lending rules apply to your situation.
Frequently Asked Questions
What deposit do I need for an investment loan in Queensland?
Most lenders require a minimum 10 per cent deposit for investment loans. If your loan-to-value ratio exceeds 80 per cent, you will need to pay Lenders Mortgage Insurance, and the premium increases as the LVR rises.
Can I still negatively gear an investment property purchased now?
Properties settled before the end of the financial year and held at 12 May 2026 retain full negative gearing. Established properties purchased after that date are subject to new rules from the 2027-28 income year, limiting loss deductions to residential property income only. Eligible new builds retain full negative gearing.
How does rental income affect my borrowing capacity?
Lenders typically assess rental income at 80 per cent of the lease amount to account for vacancy and management costs. This discounted figure is included in your serviceability calculation, and if you are also paying rent where you live, that expense works against your borrowing capacity.
Should I choose interest-only or principal and interest repayments?
Interest-only repayments reduce monthly costs and maximise your tax deduction, which suits negatively geared investors. Principal and interest repayments build equity faster and reduce total interest cost, though the repayments are higher and the annual deduction is lower.
How is capital gains tax calculated on investment property from 1 July 2027?
From 1 July 2027, gains on affected properties are taxed using cost base indexation and a 30 per cent minimum tax rate on real gains. You index the cost base by CPI and pay tax only on the portion exceeding inflation. Gains accruing before 1 July 2027 are taxed under the existing 50 per cent discount rules.
