Simple hacks to make rentvesting work for electricians

What rentvesting actually means for your situation

Rentvesting means buying an investment property while renting where you want to live. You get rental income from the property you own while paying rent in a location or property type that suits your lifestyle.

The approach makes sense if you work on job sites across the city and want to live close to beaches or the CBD, but can only afford to buy further out. Consider an electrician renting a two-bedroom unit in Bondi for $750 a week while owning a three-bedroom house in Penrith that brings in $650 a week. The rental shortfall is $100 a week, but you're claiming the interest on the investment loan, property costs, and depreciation against your taxable income. You're building equity in a property market you can actually enter while living somewhere that would cost twice as much to buy into.

The alternative is waiting another five years to save a deposit large enough to buy in your preferred area. By then, median values in that area may have moved further out of reach. Rentvesting lets you enter the market now with a smaller deposit and start paying down debt while someone else covers most or all of your holding costs.

The tax deductions that cover most of your holding costs

Every dollar of interest you pay on an investment property loan is deductible against your taxable income. If you're earning $95,000 as an electrician and paying $28,000 a year in loan interest, that interest reduces your taxable income to $67,000 before other deductions.

You can also claim strata fees, council rates, landlord insurance, property management fees, water charges, repairs, and depreciation on the building and fixtures. Depreciation alone can add $5,000 to $8,000 in deductions each year for a newer property, without you spending a cent. The combination of interest and other deductions often means your actual out-of-pocket cost is much lower than the gap between rent received and loan repayments.

In our experience, electricians who structure the loan correctly and claim everything they're entitled to often find their after-tax cost to hold the property is close to what they'd be saving toward a deposit anyway. The difference is they're paying down a mortgage and building equity instead of sitting in a savings account.

How lenders assess rentvesting applications differently

Lenders treat investment property applications differently to owner-occupied home loans for electricians. They'll use 80% of the expected rental income when calculating your borrowing capacity, not the full amount. If the property is expected to rent for $600 a week, the lender includes $480 a week as income in their assessment.

They'll also add your current rent as an ongoing expense. If you're paying $750 a week to rent and the investment property loan repayments are $820 a week, the lender needs to see that you can service both from your income. This is where finance for tradies becomes relevant, particularly if you're self-employed or paid as a contractor. Lenders will assess your income over the previous two financial years, and some will accept your accountant's year-to-date figures if you're tracking ahead of last year.

If your income is variable, the lender may apply a loading or discount depending on how consistent your declared income has been. A 10% to 20% reduction isn't unusual. Keeping your tax returns and BAS statements current before you apply makes the process much faster.

The deposit you need and where it can come from

Most lenders want a 10% deposit plus costs for an investment property if you're using rental income in your servicing. Costs typically include stamp duty, legal fees, building and pest inspections, and lender establishment fees. For a property valued at $650,000, you'd need $65,000 for the deposit plus another $8,000 to $12,000 for costs.

If you don't have that saved, you can access equity in another property if you already own one, or use a guarantor. Some lenders will go to 95% for investment properties if your income is strong and you're prepared to pay Lenders Mortgage Insurance. LMI on a $617,500 loan at 95% can be $20,000 to $30,000, depending on the lender and your profile, but it can be capitalised into the loan rather than paid upfront.

Another option is the First Home Super Saver Scheme if you meet the eligibility requirements. You can withdraw up to $50,000 of eligible super contributions to put toward a deposit on your first property, and that property can be an investment property as long as you intend to live in it as soon as practicable. The ATO defines "as soon as practicable" as within 12 months of settlement, though exceptions exist if you're required to live elsewhere for work.

Why the rental yield matters more than capital growth in year one

A property with strong rental yield means your tenant is covering more of your loan repayments. Yield is the annual rent divided by the property value. A property worth $600,000 that rents for $550 a week generates $28,600 a year, which is a yield of 4.77%. A property worth $650,000 renting for $500 a week generates $26,000 a year, which is a yield of 4%.

The higher yield property costs you less to hold each week, even though it's cheaper to buy. In the first few years of rentvesting, cash flow matters more than potential capital growth because you're covering the shortfall between rent received and loan repayments from your own income. A property that costs you $150 a week after tax to hold is more sustainable than one that costs you $300 a week, even if the second property is in a suburb with stronger long-term growth prospects.

Once you've built equity and your income has increased, you can refinance or sell and move into a property with lower yield but stronger growth. Starting with positive or neutral cash flow gives you the breathing room to stay in the market long enough for that equity to build.

Choosing between an apartment and a house in an outer suburb

Apartments closer to the city typically offer higher rental yields and lower purchase prices, but they come with strata fees and higher tenant turnover. A two-bedroom apartment in Parramatta might cost $580,000 and rent for $600 a week, but strata fees of $1,200 a quarter reduce your net rental income by $23 a week.

A three-bedroom house in a suburb like Campbelltown might cost $650,000 and rent for $580 a week with no strata fees. Maintenance costs are higher because you're responsible for everything, but tenant turnover is often lower because families stay longer. The house also has land value, which tends to appreciate more consistently than apartment values in areas where supply is increasing.

There's no single right answer. If you want lower upfront cost and higher yield, the apartment works. If you want fewer ownership restrictions and exposure to land value growth, the house works. Your decision should be based on how much cash flow you can sustain and whether you're likely to move into the property within five years. If you are, a house makes more sense because it suits a longer holding period.

What happens when you want to move into the property

When you move into your investment property, it becomes your primary place of residence and you stop claiming tax deductions on the loan interest and holding costs. You'll need to notify your lender because the loan will need to be switched from an investment loan to an owner-occupied home loan, which usually has a lower interest rate.

If you've owned the property for more than 12 months before moving in, you can still claim the main residence exemption from capital gains tax for the entire period you live in it, plus up to six years after you move out if you rent it out again. If you sell the property while it's your main residence, no capital gains tax applies. If you sell after moving out, you'll pay CGT on the portion of time it was rented, minus the six-year exemption if you use it.

The time to plan this is before you buy, not when you're ready to move in. If you know you'll want to live in the property within three to five years, buy something that suits your long-term needs, not just the rental market. That means three bedrooms instead of two, and a location you'd actually want to live in once your income increases or your circumstances change.

How to structure the loan to keep your options open

Most rentvestors use a variable rate loan with an offset account on the investment property. The offset account lets you park your savings and reduce the interest you pay without reducing the deductible loan balance. If you have a $600,000 loan and $40,000 in offset, you only pay interest on $560,000, but you can still claim interest on the full $600,000 loan amount because the loan balance hasn't changed.

This structure also keeps your options open if you later want to access that cash for another deposit or to cover costs when you move into the property. Some electricians use a split loan structure, fixing part of the loan for rate certainty and leaving part variable for flexibility. A 50/50 split gives you stable repayments on half the loan while keeping offset access and the ability to make extra repayments on the other half.

Don't use interest-only repayments unless your cash flow genuinely requires it. Interest-only loans are assessed at higher rates by lenders, which reduces your borrowing capacity for future purchases. They also mean you're not paying down any debt, so your equity only grows through capital growth and rental income. Principal and interest repayments from the start build equity faster and make refinancing or upgrading easier in three to five years.

Call one of our team or book an appointment at a time that works for you. We'll look at your income, your deposit, and where you want to buy, then show you what your holding costs will actually be after tax and how the numbers work over the first five years.

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