Can You Live in Your Investment Property? (A 2025 Guide)

If you want to buy, or already own, an investment property in NSW, you may be wondering if you can live in it. The short answer is yes. However, there are some caveats.

Legally, you are allowed to live in your investment property. But doing this comes with several financial, tax, and practical considerations you should understand first.

In this article, we’ll explain what is involved in turning an investment property into your primary place of residence.

Five key factors to consider

Moving into your investment property might be an attractive proposition. However, it is a decision that could affect your finances, obligations, and long-term plans. So, it is worth considering the following.

• Loan implications: Your mortgage may have been set up for investment purposes. Therefore, your interest rate and loan terms may change if the property becomes your primary residence.
• Tax implications: Shifting from an investment to a principal place of residence can have several tax implications. It could impact your deductions, capital gains tax, and future tax returns.
• Tenant rights: If the property is currently leased, you must follow the correct legal process to end the tenant’s residential tenancy.
• Property type: The property might be more suitable or profitable as an investment asset, rather than your primary home.
• Legal requirements: There may be legal or compliance issues you need to address. This will depend on your circumstances and the way the property is held.

Loan implications

If you're planning to move into your investment property, one of the first things to check is your home loan.

Investment loans are typically structured differently from owner-occupied loans. Therefore, living in the property may trigger the need for changes to be made to your current arrangement.

Being upfront about your intention with your lender will reduce the likelihood of unexpected issues cropping up.

Investment loan vs. owner-occupied loan

Investment loans are typically designed for properties that generate rental income. Often, they come with slightly higher interest rates and different lending criteria.

On the other hand, owner-occupied loans usually offer lower rates and more favourable terms because they carry less risk in the eyes of lenders.

If your current loan was taken out to buy an investment property, it’s important to understand how the terms may differ if your use of the property changes. It is also a good idea to establish what other loan options are available.

Refinancing

If you plan to move into your investment property and live in it, you may need to refinance to switch from an investment loan to an owner-occupier loan. This can affect your interest rate, loan terms, and tax obligations.

Refinancing can help reduce your interest rate and offer more flexible features. However, it may also come with costs such as break fees or application fees.

For this reason, it is a good idea to fully weigh up whether refinancing aligns with your current and future financial goals.

Transparency with the lender

Lenders assess loan risks based on how a property is used. So, it’s essential to inform your lender if your property becomes your main residence.

Failing to disclose such changes in occupancy may breach your loan agreement. Keeping your lender informed will ensure you stay compliant with their loan terms.

This process may even open the door to potential opportunities. Such as renegotiating for more suitable loan terms.

Tax implications

When you move into a property that was previously used as an investment, your tax situation changes.

Seeking the advice of a qualified accountant can help you to better understand the tax implications of living in your investment property.

General loss of deductions

When a property stops generating rental income, you can no longer claim tax deductions for expenses like loan interest, maintenance, insurance, or council rates.

You’ll also no longer be able to claim negative gearing benefits while the property is your home.

Capital gains tax (CGT)

When you decide to sell the property in the future, capital gains tax (CGT) will generally still apply for the period it was rented out.

However, you may be eligible for a partial CGT exemption. This depends on how long the property was your main residence compared to how long it was used to produce income.

You can learn more from the ATO guide on property and CGT.

The "six-year rule"

If you move out and rent out your home, you can still treat it as your main residence for tax purposes for up to six years. That means you might not have to pay capital gains tax (CGT) for that time if you sell it later.

But during those six years, you can’t claim any other property as your main home. Only one property can get the main residence exemption at a time.

Pro-rata exemption

If you initially rent out your property and then decide to live in it later, a pro-rata CGT exemption may apply.

This means the CGT will be calculated only for the period it was rented.

How moving in affects your property's value

As soon as you move in, the property is treated, legally speaking, as if it were sold and immediately repurchased at market value.

This may affect your CGT calculation at a later time.

Depreciation

Tax deductions for expenses like depreciation stop once you move in. This may impact your tax return. For more details, refer to the CGT exemption tool.

Tenant rights

If your Sydney investment property is currently tenanted, you must follow the correct legal procedures to end the tenancy before moving in.

In New South Wales, landlords are required to provide official written notice to tenants. The notice period depends on the type of tenancy agreement and the reason for ending it.

• If the tenancy is periodic (no fixed end date) and you wish to end it without giving a reason, you must currently give at least 90 days’ notice.
• If the tenancy is fixed-term and 6 months or less and you plan to end it at the end of the lease without a specific reason, you must give at least 60 days’ notice.
• If the tenancy is fixed-term is 12 months or more and you plan to end it at the end of the lease without a specific reason, you must give at least 90 days’ notice.
• If you have a valid reason (like a breach of the lease), a shorter notice period may apply.

From the 19th of May 2025, NSW laws will change, and landlords will no longer be able to end a tenancy without grounds. However, moving into the property is considered a valid reason to end a tenancy.

For more detailed information, visit the NSW Government's pages on landlords' rights and responsibilities and giving notice to end a residential tenancy.

Property type

The type of investment property you own can influence how practical or even possible it is to live in.

For example, if you own a single-family home, moving in is typically straightforward. So long as there are no tenants or legal restrictions in place.

However, if your property is a multi-family dwelling, like a duplex or block of units, living in one portion while renting out the rest may require some extra planning. You’ll need to consider things like shared access, landlord responsibilities, and any relevant council regulations.

Legal Requirements

Before you move into your investment property, it’s important to confirm whether doing so is legally permitted.

The most common issue is zoning. You generally can’t live in a commercial property in Sydney, even if the building physically resembles a home.

The exception is if it's zoned for mixed-use or residential conversion has been approved by the local council. Such zoning and compliance issues can limit your ability to legally convert the space into a primary place of residence.

Financing rules can also affect your plans, given that some lenders include conditions in loan agreements that specify how the property must be used.

Changing your property’s use without notifying the lender can lead to breaches or fees. So, to stay on the right side of both planning laws and your loan terms:

• Contact your local council to confirm zoning.
• Review your loan documents or speak with your lender.
• Consult a professional, such as a solicitor, accountant, or property expert, for specialist advice.

Advantages of living in an investment property

Aside from anything else, choosing to live in your investment property can come with several lifestyle and financial upsides.

Here are some of the potential benefits to consider:

Lower mortgage payments: If you switch from an investment loan to an owner-occupied loan, you can receive lower interest rates. This can reduce your monthly repayments.

Lifestyle upgrade: If the location of your investment property suits your work, family or lifestyle better, making it your primary residence may improve your daily routine and overall quality of life.

Reduced expenses: If the mortgage on your investment property has largely been paid down through rental income, occupying the property yourself can lower your cost of living. (Particularly if you no longer need to pay rent or a mortgage elsewhere).

Simplified ownership: If you move into the property, you will not have to manage tenants, work through leasing paperwork, or incur property manager fees. This can provide you with a much less stressful ownership experience.

Capital growth potential: Living in the property gives you the chance to renovate or improve it at your own pace. This may increase its value over time.

How to move into your investment property

If you’re considering moving into an investment property, here is an overview of what you will need to do:

1. Check your loan structure

Review your current mortgage to determine if it’s an investment loan. If so, speak with your lender to discuss options for refinancing.

2. Notify your lender

Inform your lender of your intention to make the investment property your principal place of residence. They will ensure your loan terms remain valid and compliant.

3. End existing tenancy

If tenants are currently living in the property, make sure you follow all your legal requirements to end the lease. You must provide appropriate notice periods under NSW law.

4. Review tax implications

Consult an accountant and review online ATO resources to understand the tax consequences of changing the property’s use. Make a particular note of implications for capital gains tax (CGT) and the loss of deductions.

5. Update relevant records

Update your address with the ATO, electoral roll, and financial institutions. This helps to establish the property as your primary residence and ensures all relevant correspondence will be sent to it.

6. Speak to professionals

If you’re unsure about any step, it is worth getting advice from your lender, solicitor, or property manager. They can help you understand your responsibilities.

Making the move: Final considerations for investors

It is possible to live permanently on your NSW investment property, but it’s not as simple as packing up and moving in. From tax and tenancy rules to loan structures and legal restrictions, there are important steps to take to protect your finances and stay compliant. With the right advice and a bit of planning, it can be a smart move both personally and financially.

If you’re considering a change, get in touch with the team at DiJones. We’ll help you understand what’s possible and talk you through any alternatives that might suit your goals.

FAQs

Can I live in my investment property straight away?

Yes, if it’s vacant and zoned for residential use, you can live in your investment property straight away. However, there might be some tax and other financial implications you should be aware of.

Do I need to tell my lender if I move in?

Yes, if you move into your investment property, you’re changing its loan purpose, which can affect your loan type, interest rate, and mortgage repayment terms. Always notify your lender to stay compliant with your Australian credit licence agreement, especially when switching from an investment to owner-occupied status.

Will I lose tax deductions if I move in?

Yes. Once you move into your rental property, it stops generating income, meaning you’re no longer entitled to claim tax-deductible expenses like maintenance, depreciation, or loan interest. A qualified tax agent can help clarify your eligibility to claim based on your financial situation.

Does moving in affect capital gains tax?

It can. CGT may apply when you sell, but rules like the six-year rule or partial exemptions might help. It is worth talking to an accountant to understand the specific implications for your circumstances.

Where can I find zoning information?

Visit your local council’s website or contact them directly to check the property’s residential use eligibility.