Should I Buy An Investment Home First Or A Home To Live In?

Thinking about getting into the property market in Australia comes with one big question a lot of people face: Should I buy an investment property first or a home to live in? There’s no single answer, since it comes down to lifestyle, finances, future plans, and what you want out of property ownership. I’ll share what I’ve learned, give you some things to consider, and walk through the advantages and potential downsides of each choice based on real Australian conditions.

Australian houses

The Australian Property Market: A Snapshot

Australia’s property market is known for its ups and downs, with a long track record of price growth in major cities like Sydney, Melbourne, Brisbane, Adelaide and Perth. Owning property is often seen as a pathway to security, but skyrocketing prices and strict lending conditions in recent years have changed how first-time buyers approach things. Whether you’re looking to grow wealth or put down personal roots, the market’s current state can tip the scales for many people.

Regulations, from lending rules to rental policies, need to factor into your plan. For example, lenders might let you borrow more for an investment than an owner-occupied home thanks to potential rental income. This can sometimes amp up your options and provide a unique advantage or challenge, depending on your situation.

What’s the Difference? Investment vs. Owner Occupied

An investment property is one you buy mainly to rent out, aiming for rental income and possible value growth over time. An owner-occupied home, on the other hand, is simply where you live—your personal home. Each has a different impact on things like tax, lifestyle, and how flexible you can be down the track.

If your goal is to create passive income and possibly enjoy tax perks, an investment property might sound appealing. But if stability, setting up a household, or having control over your own space matter more, buying your own home may pull ahead.

Choosing an Investment Property First: Pros and Cons

Going for an investment property first is pretty common in Australia, especially with the popularity of the ‘rentvesting’ trend (where you rent where you want to live, and own an investment elsewhere). Here’s a quick rundown of the upsides and challenges I’ve noticed:

Potential for Wealth Building: Using rental income to help cover the mortgage means you can get started in the market with less stress on your pockets. Over time, the property might grow in value, giving you flexibility to sell, leverage, or hold for longterm gain.
Tax Benefits: Landlords can often deduct interest on the loan, property management fees, repairs, and other expenses. Negative gearing rules let some buyers offset losses on the property against their regular income; it’s definitely worth checking with a tax pro to see how it could work in your situation. (Aussie Tax Office guide on rental income and deductions)
Still Have Flexibility: If your career or lifestyle might take you to different cities, owning an investment gives you a foothold in the market without locking you into one home where you’d have to live.

But here’s where it can get tricky:

Higher Upfront Costs: Investors usually pay higher stamp duty and may face bigger interest rates on investment loans. Lenders are often a bit stricter on the deposit you’ll need too, sometimes looking for a bigger cash buffer than they do for owner occupiers.
Tenant and Market Risks: If rental demand dips or you get a tough tenant, you might have a few stressful months. Repairs, vacancies, or changes to rental rules (that can and do happen in some states) need to be factored in; there’s no guarantee of ongoing smooth rental returns.
Missing Out On First Home Buyer Help: Some grants and stamp duty discounts for firsttime buyers in Australia are only for owner occupiers (like the First Home Owner Grant), so you might not be eligible if you buy investment first. State rules vary, so it’s worth checking what applies to you.

Choosing a Home to Live In First: Pros and Cons

Buying a home to live in brings emotional and lifestyle benefits that are hard to match with rental properties. Here’s what I and other Australians usually find appealing about making a place your own first:

Personal Stability: You get to pick your décor, bring in pets, and make changes without getting anyone’s sign off. Consistency in location is great if you want to build community, set kids up for school, or stay close to family and work.
Access to Grants and Discounts: The First Home Owner Grant (FHOG), reduced stamp duty, and federal schemes like the First Home Guarantee can save you a stack. These are often only for those planning to live in the home for a set period after settlement.
Lower Loan Barriers: Many banks offer owner occupier loans with slightly lower interest rates and friendlier deposit requirements. Having your own place can also help you build up ‘equity,’ which is handy if you want to invest later.

But owner occupiers face a few hurdles too:

Less Flexibility: Life plans can change; job moves, family needs, or different lifestyle choices can get tricky if you’re locked into a place you own and live in. Selling (or converting to a rental) is possible, but it does come with costs and effort.
No Extra Income: All the mortgage payments, maintenance, council rates, and insurance come out of your own pocket, without tenant rent to help out.
Emotional Attachment: Sometimes falling in love with a place leads to emotional decisions on upgrades or sale timing, which doesn’t always match up with what’s financially smart.

Things To Think About Before Deciding

There’s no one right approach, but here are some key factors I recommend buyers check off before jumping in:

Location and Lifestyle: Do you want to live in an area you can afford, or is your budget better suited for a place with rental appeal? Sometimes your ideal home suburb doesn’t match your first investment option.
LongTerm Plans: If you see yourself staying put for years, buying to live in makes sense. If travel or job changes are likely, a flexible investment could win out.
Financial Preparation: Can you handle unexpected rental voids, or would making repayments totally solo be tough? Use a home loan repayment calculator, and try running a budget to see how each scenario fits your lifestyle.
Government Incentives: Look up current grants, stamp duty discounts, and other programs on FirstHome.gov.au to see what you may be eligible for based on your location and purchase type.
Tax and Legal Advice: Working with a mortgage broker and tax accountant helps you spot any traps and make the most of your situation.

Common Pitfalls and How to Avoid Them

Some mistakes are way more common than you might think. Here are a few I’ve seen (or made myself) and how to steer clear of them:

Biting Off Too Much: Overextending your borrowing can get stressful if interest rates rise or your situation changes. Keeping a decent buffer gives you breathing space.
Buying with the Heart, Not the Head: For your home, it’s easy to get caught up in emotional decisions. But even a home to live in benefits from practical thinking; researching future infrastructure, resale potential, and costs can keep things in balance.
Neglecting Research: Checking vacancy rates, suburb price trends, and future development plans helps avoid nasty surprises with investment properties. For owner occupiers, studying things like school zones and public transport can pay off long term.

FAQs: Investment vs. OwnerOccupied Homes in Australia

Q: Can I use government grants if I buy an investment property first?
A: In most cases, no. Aussie first home grants and stamp duty discounts usually only apply to owner-occupied purchases, so check your state rules before making a move.

Q: What if I want to live in my investment property later?
A: You usually can, but this might affect your eligibility for tax deductions on interest and expenses, and you may need to pay capital gains tax when selling in the future. Speaking with a tax advisor is smart if you’re planning this path.

Q: Does owning an investment property improve my chances of getting an owner-occupied loan later?
A: Sometimes yes, since you might have more equity, but lenders will also factor in any rental income, your other debts, and your overall ability to repay.

Which Path Suits You?

Deciding between an investment property or your own home as your first buy all comes down to where you are in life, your goals, and what your finances look like. Some folks go for ‘rentvesting’ to get a taste of both worlds, while others want the security and pride of their very own space. Careful research helps buyers make informed decisions, and there are heaps of calculators, property guides, and brokers you can use to weigh up what works for you. Whether you put down roots or jump into investment first, a well considered move will give you the best chance of success in Australia’s tricky property scene.

If you find yourself still weighing your options, it can help to talk with friends or family who have already bought in the market. Their experience dealing with real lenders, property managers, and councils could give you insights you cannot easily get from online guides. Plus, joining informal property forums or attending free local seminars can give you up-to-date opinions and real stories from recent buyers. This extra step lets you dig into details and avoid potential missteps. Remember, every buying decision starts with research—so get into the local listings, chat with professionals, and weigh costs before locking in your first step on the property ladder. No matter which option you pick, making a plan and sticking to your budget will set you up for a smoother ride in property ownership.

About The Author: Hesti Bell is the founder of Gold Gate Finance and holds a Diploma of Finance and Mortgage Broking Management. Driven by the belief that everyone deserves the opportunity to own their own home, Hesti is passionate about helping people achieve their goals and expand their financial possibilities.