The Pros and Cons of Rentvesting in Dulwich Hill

Rentvesting means buying an investment property you can afford while continuing to rent where you actually want to live.

The approach suits buyers who want to get into the market but can't stretch to Dulwich Hill's median price, which sits around $1.4 million for a house and $800,000 for a unit. You might rent a terrace near Dulwich Hill Station while owning a unit in Wollongong or a house in Penrith, using rental income to help cover the mortgage and building equity without leaving the area you're settled in.

The Main Benefit: You Can Enter the Market Sooner

Rentvesting lets you buy property now rather than waiting years to save a deposit large enough for the suburb you're renting in. You borrow as an investor, which means slightly higher rates but access to interest-only repayments if that suits your cash flow. Your tenants cover part or most of the mortgage, and you're building equity while living somewhere you'd struggle to afford as an owner-occupier.

Consider someone renting a two-bedroom unit near Marrickville Road for $650 a week. They've saved $90,000 but would need closer to $160,000 to buy anything comparable in Dulwich Hill once you factor in stamp duty and costs. Instead, they buy a two-bedroom unit in Bankstown for $600,000 with a 15 per cent deposit. The unit rents for $520 a week. They keep living in Dulwich Hill, the investment property starts building equity, and they're in the market within a few months instead of waiting another three years.

The investment loan structure matters here. Most buyers in this situation go interest-only for the first five years to keep repayments lower and maximise deductions, then switch to principal and interest once income rises or they decide to move into the property.

The Main Trade-Off: Tax Rules Changed in May 2026

If you bought your investment property before 12 May 2026 or you're buying a new build, you can still deduct your full loss against your salary. If you're buying an established property now, from the 2027-28 income year onward, any loss can only be offset against income from other residential properties. That loss doesn't disappear, it carries forward, but it won't reduce your tax bill unless you have rental income or a capital gain from property to offset it against.

This doesn't kill rentvesting, but it does change the numbers. Where someone buying in early 2026 might have saved $4,000 a year in tax from a negatively geared property, someone buying the same property now won't see that cash flow benefit until they sell or acquire a second property. The property still grows in value and the loan still gets paid down by tenants, but the short-term tax benefit is gone unless you're buying new.

Some buyers now look harder at regional new builds or off-the-plan units in growth corridors where they can still access full negative gearing while keeping the purchase price manageable.

You Still Need Genuine Savings and Serviceability

Lenders assess investment loan applications differently to owner-occupier loans. They'll only count 80 per cent of the expected rental income when working out if you can service the loan, and they'll test your repayments at a rate roughly three percentage points higher than the actual rate you'll pay. That buffer is set by the regulator and applies across the board.

If you're borrowing more than 80 per cent of the property value, you'll pay Lenders Mortgage Insurance. That premium gets added to your loan or paid upfront, and it's calculated on a sliding scale. On a $600,000 purchase with a 10 per cent deposit, LMI might add another $15,000 to $20,000 to your costs. Some lenders let you borrow up to 95 per cent if you're buying in certain postcodes or meet specific criteria, but the premium grows quickly as the deposit shrinks.

Your borrowing capacity also gets squeezed by the debt-to-income limit that came in at the start of 2026. Lenders can only write a certain portion of their investor loans to borrowers with total debt over six times their income, so if you're already carrying a car loan or other commitments, that might cap how much you can borrow even if your income technically supports it.

Interest Rates and Repayment Structures

Investor interest rates sit around 0.3 to 0.5 percentage points higher than owner-occupier rates, depending on the lender and your deposit size. You'll also notice that some lenders pull back their sharpest discounts once you cross into investor lending, so the gap can widen beyond the headline difference.

Interest-only loans are common for investors because the repayments are lower and the full interest cost is deductible when the property is rented out. You're not paying down the loan during the interest-only period, but you're keeping more cash in your pocket each month and letting the property's growth do the heavy lifting. After five years, most loans revert to principal and interest unless you reapply to extend the interest-only term.

Some buyers split their loan between variable and fixed rates to balance flexibility and certainty. A fixed portion locks in your repayment for a set term, which helps with budgeting, while the variable portion usually comes with an offset account and no restrictions on extra repayments. If you're planning to sell within a few years or think rates might drop, a variable-only loan gives you more room to move without break costs.

Capital Growth Versus Rental Yield

You're buying for capital growth, not rental return. A property in Dulwich Hill or Marrickville might only return 3 per cent in rent, but it grows faster than a unit in the outer suburbs returning 5 per cent. The question is whether you need the cash flow now or you can carry a shortfall for a few years while the property appreciates.

In our experience, rentvestors who buy purely for yield end up disappointed when the property value stagnates. The properties that return 6 per cent are usually returning that much because no one expects them to grow. You're paying down debt with tenant money either way, but the real wealth comes from the asset appreciating over time, and that tends to happen faster closer to the city, near transport, and in areas with demographic momentum.

Dulwich Hill ticks those boxes, which is why people are willing to rent here even when they can't afford to buy. If you're rentvesting, you want to buy somewhere with similar characteristics at a price point you can manage, whether that's a suburb further out on the same train line or a regional centre with strong employment and population growth.

The Capital Gains Tax Shift from July 2027

From 1 July 2027, the way capital gains are taxed on investment properties changes. Instead of the current 50 per cent discount, you'll index your cost base to inflation and pay a minimum 30 per cent tax rate on real gains that accrue after that date. Gains that built up before July 2027 stay under the old rules.

If you're buying now and planning to hold long-term, the new rules might actually work in your favour if inflation runs high, because your taxable gain gets reduced by CPI. If you're buying a new build, you get to choose between the old discount method and the new indexed method when you sell, so you're not worse off.

For someone buying an established property in 2026 and selling in 2035, part of the gain gets taxed under the current rules and part under the new rules. The ATO will publish a formula to split it, or you can get a valuation done as at 1 July 2027 to lock in the breakpoint. Either way, it adds a layer of paperwork, and you'll want to talk to an accountant before you sell.

You're Not Building Equity in Your Home

The obvious downside is that you're still renting. Your landlord can increase your rent, sell the property, or decide not to renew your lease. You're building wealth on paper, but you don't have security of tenure in the place you actually live.

Some people rentvest for two or three years, build enough equity in the investment property to use as deposit on an owner-occupier purchase, then either sell the investment or keep it as part of a portfolio. Others rentvest indefinitely because the lifestyle and location trade-off is worth it. It depends on how much you value owning your home versus owning property in general.

If you're someone who wants to renovate, put your own stamp on a place, or just know you're not going to get a rent increase every 12 months, rentvesting will start to feel limiting after a while. If you're happy renting and you're disciplined about building a portfolio, it can be a solid wealth strategy.

When Rentvesting Makes Sense and When It Doesn't

Rentvesting works when you're priced out of the suburb you want to live in, you're confident you can carry the investment property through rate rises and vacancy periods, and you're prepared to hold for at least five to seven years. It works better if you're buying in an area with strong long-term growth prospects, even if the rental return is modest.

It doesn't work if you're stretching to cover both rent and a mortgage shortfall and you've got no buffer for repairs, periods between tenants, or interest rate movements. It also doesn't work if your main goal is to own your own home and you're only rentvesting because someone told you it was smart. The strategy has to suit your actual situation and your actual goals, not just look good in a spreadsheet.

If you're thinking about rentvesting and you're not sure whether it makes sense for your income, deposit and timeline, call one of our team or book an appointment at a time that works for you. We'll run the numbers on what you can borrow as an investor, what the repayments look like with different structures, and whether the tax changes affect your specific situation enough to reconsider.

Frequently Asked Questions