Beginner's Guide to Rentvesting in Baulkham Hills

Rentvesting means buying an investment property in one location while renting where you actually want to live.

It works when you can afford to buy somewhere that generates rental income and capital growth, but you are not ready to compromise on location, commute time or lifestyle by moving there yourself. The rental income covers most or all of the loan repayments, you claim the interest and other costs against your taxable income, and you live where it suits you.

Baulkham Hills sits in a bracket where many buyers can afford to purchase here as an investment while renting closer to the CBD, near the coast, or in an inner suburb with the cafes and nightlife they want during this stage of life. The median house price puts it within reach for someone earning a solid income who has saved a deposit but is not yet ready to move to the Hills District full-time.

Why Rentvesting Works in Baulkham Hills Right Now

Baulkham Hills attracts stable, long-term tenants because of the schools, parks and family-focused amenity.

Families moving into the area tend to stay for years, which keeps the vacancy rate low and reduces the risk of extended periods without rental income. The suburb is close to Castle Towers, Norwest Business Park and has direct access to the M2 and M7, making it appealing to renters who work across the greater Sydney region. That demand translates into consistent rental income, which is what makes the numbers work when you are servicing an investment loan while also paying rent elsewhere.

Consider a buyer who earns around $110,000 and has saved a 10 per cent deposit plus costs. They want to keep renting in Newtown because that is where their social life and work are based, but they know paying someone else's mortgage long-term is not building them anything. They buy a two-bedroom unit in Baulkham Hills. The rental income covers a large portion of the loan repayment, they claim the interest and other holding costs as deductions, and they stay in Newtown without the guilt.

How the Tax Side Actually Works

Interest on the loan, council rates, strata fees, property management, insurance and repairs are all claimable against your income while the property is rented or available for rent.

If those costs exceed the rental income, the loss reduces your taxable income, which means you pay less tax each year. That is negative gearing. Under legislation that took effect from the 2027-28 income year, properties purchased after 12 May 2026 that are not eligible new builds can only offset those losses against other residential property income, not against your salary. Losses still reduce your tax, but only when you have rental income or capital gains from other residential property to offset them against. Excess losses carry forward to future years. Properties bought before that date, or eligible new builds, continue under the old rules and can offset losses against any income including wages.

For someone rentvesting in Baulkham Hills now, that usually means the property was acquired after the cutoff. You can still claim every dollar of interest and holding costs, but the deduction only helps if you have other residential property income in the same year or you carry the loss forward until you sell.

Interest-Only Loans for Investment Property

Most investors choose interest-only repayments for the first few years because it keeps the monthly cost lower and maximises the deduction.

When you pay principal and interest, part of each repayment reduces the loan balance, and that portion is not tax deductible. When you pay interest only, the entire repayment is deductible, and your cash flow is lower. The loan balance does not reduce, but if the property is increasing in value, you are still building equity through capital growth rather than forced saving. After the interest-only period ends, the loan reverts to principal and interest unless you negotiate an extension or refinance.

Interest-only periods are typically offered for one to five years on investment loans. Lenders price investor loans higher than owner-occupier loans, and interest rates on interest-only investment loans are higher again because the bank is taking on more risk. You also need to demonstrate that you can service the loan at the principal and interest rate, even if you are only paying interest for the first few years.

What Lenders Actually Look At When You Apply

Lenders assess your borrowing capacity by adding your current rent, the proposed investment loan repayment calculated at principal and interest plus a buffer of 3 percentage points, and all your other commitments, then comparing that total to your income.

They also apply a debt-to-income limit. From February 2026, banks can only lend up to 20 per cent of their new investor loans to borrowers whose total debt is six times their income or more. If your income is $110,000 and you are borrowing $660,000 or more across all loans, you fall into that restricted category, and some lenders will decline the application simply to stay within their quarterly cap.

The rental income from the investment property is included in the assessment, but lenders typically only count 80 per cent of it to allow for vacancy and management costs. If the property will rent for $600 per week, the lender uses $480 per week in the serviceability calculation. That is why borrowing capacity for an investment loan is usually lower than for an owner-occupier loan at the same income level, because you are carrying both rent and a mortgage at the same time.

Deposit and Upfront Costs

Most investors borrow at 90 per cent loan to value ratio and pay Lenders Mortgage Insurance, or they put down 20 per cent to avoid it.

LMI is a one-off premium that protects the lender if you default, and it is calculated based on the loan amount and LVR. The premium can be added to the loan or paid upfront. It is not claimable as a deduction in the year you pay it, but it can be claimed over the life of the loan or over five years depending on how the ATO views the arrangement, so speak to an accountant before lodging.

Stamp duty in New South Wales is payable on investment property purchases at the standard rate, with no concessions or exemptions. Legal fees, building and pest inspections, and any borrowing costs also need to be covered upfront. In our experience, buyers underestimate how much cash they need at settlement, especially when they are also paying rent and trying to keep an emergency buffer.

Fixed or Variable Rate on an Investment Loan

Variable rates give you flexibility to make extra repayments or refinance without break costs, and they move with the market.

Fixed rates lock in your repayment and your deduction for a set period, which makes budgeting easier but removes flexibility. If you fix and then want to sell, refinance or pay down the loan early, you may face break costs that run into the thousands. Some investors split the loan, fixing part for certainty and leaving part variable for flexibility. The right structure depends on whether you value certainty over control, and how long you plan to hold the property before selling or refinancing.

Rentvesting is not about timing the market or picking the next boom suburb. It is about entering the property market in a location you can afford, building equity while living where you want to be, and using the tax system to reduce the holding cost. Baulkham Hills offers stable tenants, decent infrastructure and a price point that makes the deposit achievable without waiting another three years.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions