Most investors think in two lanes: buy and hold or add value through renovation and development.
But there’s a third path hiding in plain sight — one that doesn’t show up on any borrowing capacity calculator, and one most families never consider: developing their own home.
The squeeze is real
Negative gearing is no longer available on established property; it’s now restricted to new builds only. That single change reshapes the maths on the traditional “buy an established investment and hold” strategy, and makes it harder to hold quality, green-titled properties in high-demand areas at a realistic price point.
Layer borrowing capacity on top and a lot of quality investment assets are simply out of reach. Take a common scenario: a family owns a $1.2M home with reasonable debt, and their borrowing capacity for an investment purchase comes back at $700K. That’s a workable budget, but it’s a budget that struggles to secure a green-titled property in good suburbs. The compromise is usually a villa or an apartment. Sure, you can still land a decent asset, but is there a better way to allocate that capital?
The overlooked lever: your own address
Instead of acquiring another asset, sell the $1.2M home. Upgrade into a 700–800sqm block in one of the high-demand suburbs you would actually want to invest in, say $1.3M–$1.5M, with subdivision potential built in. Now you’re not choosing between your home and an investment, you’ve combined them. Your borrowing capacity covers the home upgrade and leaves enough surplus to fund the construction out the back.
Subdivide, and build a new dwelling on the rear lot. Because it’s a new build, it qualifies for negative gearing under the current rules, something an established investment purchase no longer offers. Full depreciation schedule, strong rental appeal, and cashflow that an older property simply can’t compete with. Meanwhile, the front lot is your home. Renovate it and settle in or sell it and roll the strategy forward again.
In many cases this lets you upgrade your home, pick up an investment-grade asset in a high-quality area with negative gearing intact, and bank equity uplift to put toward the next move. The real question comes down to opportunity cost: a $1.2M home and a $700K investment property, or ~$1.7–1.9M developing and renovating in a genuinely superior suburb for long-term growth?
A recent example
- Client bought a property in Craigie worth ~$1,100,000 with subdivision potential on an 823sqm duplex site
- All-up costs for a 4×2 build on the rear lot, including subdivision, came to $623,434
- Valuer came back with a combined end valuation of $2,130,000 across the two properties
- Client can now sell the front and go again on another site or renovate it as a longer-term family home
Where this stacks up
The fundamentals work in most high-quality growth areas, whether that’s Melville and surrounds, or the northern corridor up until Beldon and Craigie. The key importance is supply; the area needs to have strong growth fundamentals and low supply. We are talking long-term family areas with high rates of owner occupiers where demand is consistently strong and not hindered by market conditions.
It is a more hands-on strategy, and the real consideration isn’t the numbers, it’s the family. Can you handle a renovation and the disruption of uprooting the household? For newer investors or home upgraders willing to go through that process, it’s well worth thinking about.
If your borrowing capacity has boxed you out of your ideal investment range, maybe it’s time to treat the home itself as the investment. For the right family, in the right suburb, it’s the most underused lever they have.
