If you’ve been staring at skyrocketing house prices wondering, “Can first home buyers buy an investment property instead?”, you’re not alone. Thousands of Australians are now skipping the traditional “dream home first” approach and using a strategy called rentvesting to get into the property market sooner. Instead of buying where they want to live, they buy where they can afford – then continue renting in the suburb or city they actually love.
For many first-home buyers, this strategy feels like a huge relief. Especially in expensive cities like Sydney or Melbourne, buying a home to live in can feel impossible. But buying an investment property as your first property purchase may help you build wealth, generate rental income, and potentially buy your dream home later. The good news? Yes – first home buyers can absolutely buy an investment property. But there are important pros, cons, tax implications, and first-home buyer grant rules you need to understand before making the leap.
Can First Home Buyers Buy an Investment Property in Australia?
Yes, first-home buyers can absolutely buy an investment property in Australia. There are no restrictions preventing a first-home buyer from purchasing an investment property instead of an owner-occupied home. Many major lenders including Commonwealth Bank, Westpac, ANZ, NAB, Pepper Money and Mortgage Ezy offer investment home loans to eligible borrowers. However, buying an investment property first can impact your eligibility for first-home buyer grants, stamp duty concessions and government schemes later on. That’s why it’s important to understand both the advantages and disadvantages before making a decision.
What Is Rentvesting and Why Is It Becoming So Popular?
Rentvesting is when you rent where you want to live while owning an investment property somewhere more affordable. This strategy has become incredibly popular because many Australians want to enjoy the lifestyle of living near work, beaches, restaurants, schools or transport hubs without needing to buy in those expensive locations immediately.
Instead of waiting years to save a massive deposit for a property in a premium suburb, buyers are choosing to purchase in areas where the numbers make more financial sense. The emotional shift is surprisingly powerful. When buying a home to live in, emotions often drive decisions. Buyers fall in love with kitchens, views, cafés nearby and lifestyle features. But when buying an investment property, the focus usually shifts toward rental demand, capital growth potential and long-term returns. For many Australians, that mindset creates opportunities they never realised existed.
Advantages of Buying an Investment Property First
One of the biggest benefits of buying an investment property first is that it may help you enter the property market sooner. Many first-home buyers feel completely priced out of the suburbs they want to buy in. Purchasing an investment property in a more affordable area can open the door to ownership years earlier than expected.
Getting into the market earlier may also allow you to start building equity sooner. Over time, that equity may help fund a future home purchase.
Another major advantage is flexibility. Rentvesting allows you to continue living where you want while still building wealth through property ownership. Many Australians love the freedom of renting close to work or lifestyle locations while owning an investment property elsewhere.
There can also be financial advantages.
An investment property may generate rental income, which can help offset mortgage repayments. If the property performs well financially, the additional income could even improve your future borrowing power.
Some buyers also prefer the more strategic approach of investing first. Rather than buying emotionally, they focus on suburbs with stronger growth potential or better rental yields.
In some cases, the investment property may even outperform the owner-occupied home they originally wanted to buy.
Tax Benefits of Buying an Investment Property as a First Home Buyer
One reason investment properties appeal to Australians is the potential tax benefits. Property investors may be able to claim deductions on loan interest, council rates, repairs, maintenance, insurance and property management costs. The Australian Taxation Office (ATO) provides detailed information about investment property deductions and tax obligations.
Negative gearing is another reason many Australians consider investment properties. If your rental income is lower than your property expenses, you may be able to offset those losses against your taxable income. While that can help reduce tax, it’s important to remember that negatively geared properties can still create short-term financial pressure. Like any investment, there are risks involved.
Can First Home Buyers Get the First Home Owner Grant for an Investment Property?
Possibly – but the rules can be complicated.
Some states allow first-home buyers to access the First Home Owner Grant if they initially live in the property for a required period before renting it out.
Generally, buyers may need to move into the property within a certain timeframe and live there for at least six to 12 months. After meeting those conditions, they may then convert the property into an investment property.
Rules vary across Australia, so checking your state’s eligibility criteria is extremely important before making plans around grants or concessions.
Helpful resources include the Moneysmart First Home Buyer Guide and your state revenue office website.
Disadvantages of Buying an Investment Property First
While rentvesting can be a smart strategy, it also comes with challenges. One downside is that investment home loans often have slightly higher interest rates than owner-occupied home loans. Lenders generally see investment lending as carrying higher risk, which can increase repayments.
Another important consideration is the potential loss of first-home buyer incentives. In many cases, once you purchase residential property in Australia, you may no longer qualify for certain first-home buyer grants or stamp duty concessions later on. That reality can catch buyers off guard.
You also need to remember that if you are rentvesting, you may still need to cover your own rent while also paying your investment property mortgage. If rental income does not fully cover the property expenses, the shortfall comes out of your own pocket.
There is also the emotional factor. Some people simply want a place to call home. They want to renovate, personalise their space and enjoy the security of knowing they will not need to move unexpectedly. An investment property may help build wealth, but emotionally it can feel very different from owning your own home.
Can First Home Buyers Buy an Investment Property With a Small Deposit?
Yes, some lenders allow first-home buyers to purchase investment properties with relatively small deposits.
Depending on the lender, borrowers may be able to secure an investment home loan with a deposit as low as 5% or 10%, although lenders mortgage insurance may apply. Lenders such as Macquarie Bank, ING, Bankwest, Adelaide Bank and Pepper Money all have different lending policies and assessment criteria. Your borrowing power will usually depend on your income, existing debts, credit score, living expenses, deposit size and expected rental income.
What Is the Best Home Loan for a First Home Buyer Buying an Investment Property?
There is no one-size-fits-all investment home loan.
Some borrowers prioritise low interest rates and lower repayments, while others focus on offset accounts, flexible features or fast approvals. Certain buyers may prefer interest-only loans for cash flow reasons, while others may want principal-and-interest repayments to build equity faster. The right mortgage ultimately depends on your financial goals, risk tolerance and long-term plans. Comparing lenders carefully matters because even a small difference in mortgage rates can potentially save thousands over the life of a home loan.
Should You Buy Your First Home as an Investment Property?
That depends entirely on your goals. If your main priority is lifestyle, emotional security and having a place to truly call your own, buying an owner-occupied home first may suit you better. But if your focus is building wealth, entering the market sooner and creating future financial flexibility, then buying an investment property first could be a smart move. For many Australians, rentvesting offers a middle ground between lifestyle freedom and long-term investing. There is no perfect strategy for everyone. The key is understanding your financial position, your borrowing power and your future plans before taking on a mortgage.
Frequently Asked Questions About First Home Buyers Buying Investment Properties
Can first home buyers buy an investment property in Australia?
Yes. First-home buyers are allowed to purchase investment properties in Australia, although some government grants and incentives may not apply.
Can I live in my investment property later?
Yes. Many Australians eventually move into their investment property or convert it into their primary residence in the future.
Do first-home buyer grants apply to investment properties?
Sometimes. In some states, buyers may still qualify if they initially live in the property for the required minimum period before renting it out.
Is rentvesting worth it in 2026?
For many Australians facing affordability challenges, rentvesting can be an effective strategy for entering the property market sooner while maintaining lifestyle flexibility.
Are investment property mortgage rates higher?
Usually yes. Investment home loans often carry slightly higher interest rates compared to owner-occupied loans.
Final Thoughts on Buying an Investment Property as a First Home Buyer
For many Australians, buying an investment property first is no longer considered unusual – it is becoming the strategy that finally makes property ownership possible. The property market has changed dramatically. Waiting years to afford the perfect home is not always realistic anymore. Sometimes the smartest move is simply getting started. Whether you’re considering rentvesting, comparing investment home loan rates or trying to calculate your borrowing power, understanding your options can make a huge difference to your financial future.
Compare home loan rates, explore investment mortgage options and use powerful mortgage calculators at RateBuster to find the right strategy for your first property purchase.
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