Buyer comparing buying a home to live in with purchasing an investment property.

Published in: Financial Advice

Should You Buy a Home to Live In or an Investment Property First?

Q: Should I borrow my maximum borrowing capacity?

No. Maximum borrowing capacity is not a recommendation to borrow that amount. A lender's assessment determines how much you may be able to borrow under its criteria, but you can choose to borrow less. A smaller loan can mean lower repayments, more financial breathing room, a larger buffer for unexpected expenses and greater flexibility if interest rates or your personal circumstances change.

Author Tom

Published on: September 18, 2026

If you’re ready to buy property, you may be weighing up two very different options. Should you buy a home to live in, or continue renting and buy an investment property first? There isn’t one answer that is right for everyone. You may want the security and stability of owning the home you live in. Or you may be comfortable renting and see an opportunity to invest in property first, particularly if the areas you want to live in are more expensive than the areas you’re considering for investment. This is where rentvesting can become an option. But neither strategy should be chosen simply because you can qualify for a particular loan amount. At 20/20 Finance, we believe property ownership should be approached with a focus on sustainable wealth building, rather than borrowing as much as a lender will allow. Your maximum borrowing capacity is a ceiling, not a target. Borrowing less can mean lower repayments, more financial breathing room and greater flexibility when your circumstances change. So before deciding whether to buy a home to live in or an investment property first, it’s worth understanding what each strategy could mean for your finances and your longer-term goals.

Option 1: Buy a Home to Live In

Buying a home to live in can be an excellent long-term strategy. Instead of paying rent to a landlord, you’re building equity in a property you own while having greater control over where and how you live. You can renovate, make changes to the property and establish roots without worrying about a landlord deciding to sell or increase the rent. If the property increases in value over time, that may also contribute to your overall wealth. But buying a home doesn’t mean you need to buy the most expensive property you can afford. In fact, deliberately buying below your maximum borrowing capacity can provide significant advantages. A lower loan can mean:

Lower repayments
Less interest paid over the life of the loan
More room for unexpected expenses
Greater ability to manage interest-rate increases
More capacity to save
Potentially more capacity to invest later
Less pressure on your household cash flow

You don’t need to maximise your mortgage to make home ownership a successful wealth-building strategy. Comfortable ownership can be more valuable than maximum borrowing.

Option 2: Continue Renting and Buy an Investment Property

You don’t have to own the property you live in before you can become a property investor. If you’re comfortable renting, you could potentially continue renting the home that suits your lifestyle while buying an investment property elsewhere. This is commonly known as rentvesting. You might choose this strategy because you want to rent close to work, family, schools or the lifestyle you enjoy, while purchasing an investment property in a location that better fits your investment objectives and borrowing capacity. The important point is that rentvesting isn’t necessarily a strategy for people who can’t afford to buy a home. You might be able to afford a home but decide that continuing to rent and investing elsewhere better suits your circumstances. However, there are trade-offs. You are still paying rent while also taking on the financial commitments associated with owning an investment property. These can include:

Investment loan repayments
Property management fees
Insurance
Council and water costs
Maintenance and repairs
Body corporate costs where applicable
Periods without a tenant
Interest-rate changes
Other property ownership expenses

Rental income can contribute towards the property’s costs, but it doesn’t remove the financial responsibility of owning the property.

Don’t Assume the Investment Property Is Automatically the Better Choice

An investment property isn’t automatically a better financial decision simply because it has the potential to increase in value. Property values can fall or remain flat. Rental income can change. Interest rates can increase. Unexpected expenses can arise. And buying an investment property creates additional debt. The question shouldn’t simply be: “Can I afford an investment property?” A more useful question is: “Can I comfortably own and hold this investment property as part of my broader financial strategy?” That’s an important distinction. Building wealth isn’t about taking on the maximum amount of debt available to you. It’s about creating a strategy that you can realistically maintain.

You Don’t Have to Borrow Your Maximum

Your borrowing capacity is one of the first things you need to understand when considering either strategy. But it is important to understand what borrowing capacity actually tells you. If a lender determines that you could borrow $900,000, that doesn’t mean you need to spend $900,000. You might decide that a $700,000 loan provides a much more comfortable lifestyle and leaves you with greater financial flexibility. That difference can matter significantly over the life of the loan. A smaller loan can give you more room to:

Build an emergency buffer
Handle unexpected expenses
Make additional repayments
Continue investing
Save for future goals
Manage periods where income changes
Cope with higher interest rates

There is nothing wrong with having borrowing capacity that you choose not to use. In fact, deliberately borrowing below your maximum can be a sensible part of a long-term wealth-building strategy.

What If Buying a Home Would Use Most of Your Borrowing Capacity?

This is where the decision becomes more strategic. Suppose you can afford to buy a home in the area where you want to live. You need to consider what happens after the purchase. Will the mortgage still leave you enough cash flow to pursue your other goals? Would you still have a suitable financial buffer? Would you be able to manage an increase in interest rates? Would you still have the capacity to invest later if that’s part of your plans? Would the purchase leave you financially stretched? If buying a particular home would consume most of your available borrowing capacity and leave little room for anything else, it may be worth considering whether buying a less expensive home could provide a better overall balance. You don’t have to spend your entire borrowing capacity simply because it is available.

What If You Can Afford an Investment Property More Comfortably?

This is where rentvesting can become worth considering. You may find that purchasing an investment property requires less borrowing than purchasing the type of home you would ideally like to live in. Instead of stretching your finances to buy a home immediately, you could potentially continue renting while owning an investment property. But again, the question shouldn’t simply be: “Can I buy an investment property?” It should be: “Does buying this investment property make sense for my financial position and longer-term goals?” That means looking at the full picture, including the deposit required, loan repayments, rental income, property expenses, potential future borrowing and your ability to comfortably hold the property.

What Happens to Your Future Borrowing Capacity?

The property you buy first can affect what you are able to do later. If you buy a home, the associated home loan becomes one of your financial commitments. If you buy an investment property, the investment loan becomes one of your financial commitments. Lenders may consider rental income from an investment property when assessing future borrowing capacity, but they also consider the associated debt and expenses. Different lenders can assess income, rental income, expenses and existing debts differently. This means your first property purchase should ideally be considered in the context of what you may want to do next. Don’t just ask: “Can I buy this property?” Also ask: “What could buying this property mean for my next property decision?”

What About First-Home Buyer Grants and Government Schemes?

If you’re eligible for first-home buyer assistance, this needs to be part of the conversation before deciding whether to invest first. Depending on the specific government scheme, purchasing property before buying your first home may affect your future eligibility. However, the rules aren’t the same for every scheme, and eligibility requirements can change. So don’t assume that buying an investment property first automatically means you lose every first-home benefit. But don’t assume you’ll retain them either. Check the current eligibility requirements for the specific scheme before making a decision. You then have something meaningful to compare. For example:

Option A

Buy a home to live in and potentially use an available first-home buyer grant, concession or other government assistance if eligible.

Option B

Continue renting, potentially invest first and accept that this may affect eligibility for certain first-home benefits in the future. The value of any available government assistance should be considered alongside the potential benefits, costs and risks of the alternative strategy.

Is It Worth Missing Out on First-Home Buyer Benefits to Rentvest?

This is a particularly important question for someone considering rentvesting. There isn’t a simple yes or no answer. A first-home buyer benefit may provide a meaningful financial advantage, but that doesn’t automatically mean using it to buy a home is the best long-term strategy for every person. You need to compare the potential value of the benefit with the overall financial implications of buying a home versus continuing to rent and investing. For example, consider:

How much the first-home benefit is actually worth
The purchase price of the home you would buy
The deposit and loan required
Your expected repayments
The cost of continuing to rent
The investment property‘s purchase price
Expected rental income
Investment property costs
Your future borrowing capacity
Your ability to comfortably hold the property
Your longer-term property goals

The important point is not to give up a government benefit casually. Equally, don’t choose a property strategy solely because a government incentive is available if the broader strategy doesn’t suit your circumstances.

Does the Investment Property Have to Be Cheaper Than the Home You Want?

No. An investment property doesn’t automatically need to be a cheaper property. The right investment depends on the strategy being considered. You need to look at factors such as:

Location
Rental demand
Property type
Supply
Purchase price
Rental income
Ongoing costs
Potential capital growth
Vacancy risk
Your ability to hold the property

There are also significant differences between houses, townhouses and units. For example, in areas such as Moreton Bay, there are plenty of townhouses that can cost more than units closer to Brisbane’s CBD. So a simplistic rule such as “buy the cheapest property you can” isn’t particularly useful. The property needs to make sense for the strategy.

Is Buying a Home Still a Wealth-Building Strategy?

Absolutely. Property investment discussions can sometimes make buying a home sound like the less sophisticated financial choice. It isn’t. Your home can become a significant asset as you build equity through loan repayments and potential capital growth. Home ownership can also provide:

Housing security
Greater control over where you live
Freedom to renovate
Protection from future rental increases
The opportunity to build equity over time

You don’t need to own an investment property for property ownership to contribute to your wealth. And you don’t need to borrow your maximum capacity to make buying a home worthwhile.

What Does a Sustainable Property Strategy Look Like?

A sustainable property strategy isn’t necessarily the one that gives you the biggest loan. It may be the one that leaves you with enough financial capacity to cope when life doesn’t go according to plan. Consider what could happen if:

Interest rates rise
Your income temporarily falls
Your expenses increase
You have children
You need to replace a vehicle
Your property requires major repairs
Your investment property is vacant
Property values don’t increase as expected

If your strategy only works when everything goes perfectly, it may be too aggressive. A more manageable loan can give you options. Financial flexibility is valuable.

So, Should You Buy a Home or an Investment Property First?

The answer depends on what you’re trying to achieve.

Buying a home to live in may make sense if:

Owning your home is a major priority.
You are comfortable with the repayments.
You can buy without stretching your finances unnecessarily.
You value stability and control over where you live.
The purchase still leaves you with an appropriate financial buffer.
You want to establish a home base before considering investment.
You aren’t relying on using every dollar of your maximum borrowing capacity.

Continuing to rent and investing first may be worth considering if:

You are genuinely comfortable continuing to rent.
You want to live in an area where buying doesn’t currently make sense to you.
An investment property fits your financial position.
You have considered the impact on future borrowing capacity.
You understand the costs and risks of investment property ownership.
You have considered the potential impact on first-home buyer benefits.
You can comfortably hold the investment without relying on everything going perfectly.

Buying below your maximum borrowing capacity may make sense if:

You want lower repayments.
You value financial breathing room.
You want to maintain a larger cash buffer.
You expect your circumstances to change.
You want flexibility to invest later.
You don’t want your mortgage to dominate your household finances.

Your Maximum Borrowing Capacity Isn’t Your Property Budget

This is one of the most important points to understand. A lender’s assessment tells you what you may be able to borrow under that lender’s lending criteria. It doesn’t tell you what you should borrow. There is a significant difference. Your actual property budget should take into account how much debt you’re comfortable carrying, your lifestyle, your financial buffer and what you want your life to look like after settlement. You don’t need to prove that you can borrow the maximum. You don’t need to buy the most expensive home you qualify for. And you don’t need to take on additional investment debt simply because you have the capacity to do so. The goal should be to build wealth in a way that remains manageable.

The Better Question

Instead of asking: “How much can I borrow?” ask: “How much can I comfortably borrow while still living the life I want and working towards my other financial goals?” Then ask: “Should that borrowing be used to buy a home to live in, or could another property strategy make sense?” That is a much more useful conversation. Because the best property strategy isn’t necessarily the one that gives you the biggest property portfolio. It is the one that helps you build wealth without putting unnecessary financial pressure on your life.

Key Takeaways

Buying a home to live in can be an excellent long-term wealth-building strategy.
Continuing to rent while buying an investment property can also be appropriate for some buyers.
Neither strategy is automatically better.
Rentvesting isn’t simply a strategy for people who can’t afford to buy a home.
Buying an investment property creates additional debt and ongoing costs.
A cheaper property isn’t automatically a better investment.
Your maximum borrowing capacity is not a recommendation to borrow that amount.
Borrowing less can mean lower repayments and greater financial flexibility.
A sustainable strategy should allow for unexpected expenses, changing interest rates and changes in personal circumstances.
First-home buyer grants and schemes should be considered before deciding to invest first.
The best strategy is the one that fits your goals, circumstances and ability to comfortably manage the debt.

Frequently Asked Questions

Should I buy a home or an investment property first?

There is no universal answer. Buying a home may be the better choice if owning your residence is a priority and the mortgage can be managed comfortably without stretching your finances. Buying an investment property while continuing to rent may suit someone who is comfortable renting and wants to invest in a different property market. The decision should consider your borrowing capacity, cash flow, deposit, government schemes, future plans and the properties being considered.

Should I borrow my maximum borrowing capacity?

Not necessarily. Maximum borrowing capacity is not a recommendation to borrow that amount. A lender’s assessment determines how much you may be able to borrow under its criteria, but you can choose to borrow less. A smaller loan can mean lower repayments, more financial breathing room, a larger buffer for unexpected expenses and greater flexibility if interest rates or your personal circumstances change.

Is borrowing less than I can afford a good idea?

It can be. Deliberately borrowing less may make it easier to manage repayments and maintain a financial buffer. It can also leave you with more flexibility for future goals, including saving, investing or handling unexpected costs. The appropriate loan size depends on your circumstances and objectives, but there is no requirement to use your full borrowing capacity simply because a lender makes it available.

Is it better to buy an investment property before buying a home?

Not necessarily. An investment property can provide rental income and potential capital growth, but it also creates additional debt and ongoing ownership costs. Buying a home can provide housing security and allow you to build equity in the property you live in. The better strategy depends on your goals, borrowing capacity, cash flow, property choices and what you want to achieve in the future.

Can I continue renting while owning an investment property?

Yes. This is commonly known as rentvesting. You rent the home you live in while owning an investment property elsewhere. Your lender will consider your overall financial position, including your rent, income, existing debts, investment loan and relevant rental income. You also need to be comfortable managing both your rent and the ongoing costs of owning the investment property.

Does buying an investment property affect future borrowing capacity?

It can. An investment loan becomes part of your financial commitments when a lender assesses a future application. Some rental income may be included in the assessment, but lenders also consider the investment debt and relevant expenses. Different lenders can assess income and commitments differently, so the effect on future borrowing capacity depends on your circumstances and the lending policy being applied.

Will I lose my first-home buyer benefits if I buy an investment property?

You may, depending on the particular government scheme and its current eligibility rules. Some programs have requirements relating to previous property ownership or whether a property is occupied as your principal place of residence. Because eligibility rules can change, check the specific scheme before purchasing an investment property if retaining access to a first-home buyer benefit is important to you.

Is it worth giving up first-home buyer benefits to rentvest?

It depends on the numbers and your longer-term objectives. First-home buyer benefits can be valuable, but they need to be compared with the potential benefits and costs of continuing to rent while purchasing an investment property. Consider the value of the available benefit, the home you could purchase, the required loan and repayments, your rental costs, the investment property‘s potential income and expenses, and your ability to comfortably hold the investment. Eligibility rules also vary between government schemes and can change, so they should be checked before making a decision.

Does an investment property have to be cheaper than the home I could buy?

No. The appropriate investment property isn’t determined simply by finding the cheapest property. Purchase price needs to be considered alongside rental demand, location, property type, supply, ongoing costs, potential growth and your ability to comfortably hold the property. A more expensive property can sometimes be a better fit for an investment strategy, while a cheaper property can sometimes be the better choice.

Is buying my own home a good way to build wealth?

It can be. Your home can become a significant asset as you build equity through loan repayments and any increase in its value. Home ownership can also provide housing stability and control over where you live. You don’t need to own an investment property for property ownership to contribute to your long-term wealth. The key is making sure the purchase and loan are manageable within your broader financial circumstances.

How do I know how much I should actually borrow?

Start with your goals rather than the lender’s maximum figure. Consider the repayment you would be comfortable making, your other expenses and commitments, your financial buffer, potential changes to your circumstances and whether you want capacity for future investments or other goals. A broker can help you understand your borrowing capacity and how different loan amounts affect your options, but the amount you can borrow and the amount you should choose to borrow are two different questions.