First home buyers
Buying an investment property as a first home buyer
First home buyer investment property: how buying one affects your grants, your deposit, your loan and the costs, in plain English from the Finance Lab team.
Yes, as a first home buyer you can buy an investment property as your first purchase, but it is a different decision to buying a home to live in, and it usually changes the first home buyer support you can access. Most first home buyer grants and stamp duty concessions are tied to living in the home, so buying an investment property first may mean you miss out on them. Whether it suits you depends on your circumstances and lender criteria.
This guide explains what a first home buyer investment property means, who may qualify for first home buyer support, how the loan and the costs work, and the steps to take. Figures here come from the Australian Securities and Investments Commission (ASIC) Moneysmart. Rules and eligibility change, so always check the current criteria before you decide.
Can a first home buyer buy an investment property
There is no rule that stops a first home buyer from buying an investment property as their first purchase. You can buy a property, rent it out, and earn rental income rather than live in it. An owner-occupier home is one you live in, while an investment property is bought to earn rental income and potential capital growth rather than to live in.
The catch is the support. Most first home buyer help is built around owner-occupiers, the people who live in the home they buy. A first home buyer for investment property purposes is treated differently to a first home buyer moving into their own place, and that difference matters most for grants, concessions, and some loan options.
First home owner grant and investment property
A common question is whether a first home owner grant and investment property can go together. In most cases they cannot. State and territory first home owner grants generally require you to move into the home and live in it as your main home for a set period after settlement. An investment property you rent out would not meet that residence test, so you would generally not qualify for the grant on a property you do not live in.
The same logic usually applies to first home buyer stamp duty concessions, which are also typically tied to living in the home. The exact rules, amounts, and residence periods vary by state and territory and are reviewed over time, so check the current criteria with your state or territory revenue office before you assume you qualify.
The Australian Government 5 percent deposit scheme is also built for buyers who will live in the home, not for investors. If you are weighing up the buy investment first home buyer path against buying a home to live in, the loss of these grants and concessions is one of the biggest trade offs to factor in.
Grant and concession rules change and vary by state and territory. Confirm the current residence requirements, amounts, and eligibility with your state or territory revenue office before you make an offer.
How an investment loan and the deposit work
An investment property is bought with a loan in much the same way as a home, but lenders look closely at how you will service it. Some lenders may accept a deposit as little as 5 percent, but a bigger deposit means you borrow less so your loan costs less.
If your loan-to-value ratio is above 80 percent you may need to pay lenders mortgage insurance, a one-off fee that protects the lender if you cannot repay the loan. A smaller deposit may mean higher costs such as lenders mortgage insurance, unless you are eligible for the Australian Government 5 percent deposit scheme, which is generally limited to owner-occupiers. For a fuller explanation of how the loan-to-value ratio works, see the LVR guide. What is lvr first home buyer
With most home loans you make principal and interest repayments, paying off the amount borrowed plus interest. With an interest-only loan your repayments only cover the interest for an initial period, so the amount you borrowed is not reduced. A fixed interest rate stays the same for a set period, while a variable interest rate can go up or down as the lending market changes. A comparison rate is a single figure of the cost of a loan that includes the interest rate and most fees, which helps you compare loans. To see what your repayments and borrowing capacity might look like, try the borrowing power calculator.
Borrowing power calculator
Open the calculator to run your own numbers.
What it costs to hold an investment property
Buying an investment property has upfront and ongoing costs that a first purchase to live in also carries, plus some that are specific to renting a property out. Upfront costs of buying a property can include stamp duty, conveyancing fees, legal costs, search fees, and pest and building reports.
An investment property has ongoing expenses such as council and water rates, building insurance, landlord insurance, body corporate fees, land tax, property management fees, and repairs and maintenance. If an investment property increases in value, you benefit from a capital gain when you sell it. A positively geared investment is one where rental income is more than the expenses, and you may pay tax on that rental income. Tax outcomes depend on your circumstances, so it is worth speaking with a registered tax agent or accountant.
Risks to weigh up
Property investment is not a one-way bet. Property investment carries the risk that if the property value goes down you could end up owing more than the property is worth, and vacancy periods mean you cover the mortgage from your own pocket. As a first home buyer, you may have a smaller deposit and less of a buffer than an established investor, so it is worth being honest about how you would manage a rate rise or a few months without a tenant.
It can also be harder to build a deposit while renting somewhere yourself and paying a mortgage on an investment property at the same time. Your credit history matters here too. Lenders use your credit score, or credit rating, to decide whether to give you credit or lend you money, and a higher score means the lender will consider you less risky. Your credit score is calculated from information in your credit report, including how much you have borrowed, the number of credit applications you have made, and whether you pay on time. You have a right to get a copy of your credit report for free every three months, so it is worth checking yours before you apply.
First home buyer vs investment property
The first home buyer vs investment property choice comes down to what you want the property to do for you. Buying a home to live in can give you somewhere to settle and access to first home buyer grants, stamp duty concessions, and the government 5 percent deposit scheme if you are eligible. Buying an investment property first can let you enter the market in an area you can afford and earn rental income, but you generally give up the owner-occupier grants and concessions, and you take on landlord costs and risks from day one.
| Consideration | Home to live in | Investment property |
|---|---|---|
| First home owner grant | May qualify if you meet the residence rules | Generally does not qualify |
| Stamp duty concession | May qualify as an owner-occupier | Generally does not qualify |
| Government 5 percent deposit scheme | May be eligible | Generally not eligible |
| Income | No rental income | Rental income, which may be taxable |
| Ongoing costs | Your own running costs | Landlord costs such as rates, insurance, and maintenance |
Some first home buyers look at a third path, sometimes called rentvesting, where they buy an investment property to rent out while continuing to rent where they want to live. This keeps lifestyle and investment separate, but it usually means the same loss of owner-occupier grants. If you are still building a deposit, you may also want to read about buying with a smaller deposit. Buying with 5 percent deposit There is no single right answer; it depends on your goals, your budget, and lender criteria.
How to decide
- Get clear on whether you want a home to live in, an investment, or a mix of both.
- Check which first home buyer grants and stamp duty concessions you would qualify for, and whether buying an investment property would mean losing them.
- Work out your borrowing capacity and a realistic deposit, taking in your income, commitments, and credit history.
- Map the full costs of an investment property, including the upfront buying costs and the ongoing landlord costs.
- Stress test your budget against a rate rise and a vacancy period before you commit.
- Get tax advice on rental income, deductions, and any future capital gain.
- Compare lenders and loan options, then get pre-approval before you make an offer.
Talk to the team at Finance Lab
If you are weighing up buying an investment property as your first purchase, the team at Finance Lab can help you compare your options, check what first home buyer support you may qualify for, and work through the numbers. Get in touch and we will help you understand what may be possible for your situation.
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