I have recently received newsletter from mortgage broker who is also writing articles for Australian Property Investors magazine. The newsletter has featured an article about pros and cons of buying an investment property or buying a house (if someone has to choose from the two). Here is the link: http://www.prosolution.com.au/free_newsletter/dec05.pdf I think there is actually the third option that brings together “the best of the two worlds”. You could buy an investment property in Trust and rent it from the trust. Advantages: • You gain asset protection • You live in the house that you actually wanted to leave in • Your loan and other property related expenses and depreciation are tax deductible • The property is bought in the right structure to convert it later to investment property • Your ownership structure is much more flexible to cater for changing financial situation of the potential owners (i.e. husband and wife owing as tenants in common with specific percentages according to their income which might change in future – not very flexible) • You might utilize negative gearing via Hybrid Trust There are of course some disadvantages: • No 50% concession on Capital Gain Tax • Must rent out the property at market rent (very important) • If using Hybrid Trust, not all lenders understand and accept it Your comments are welcomed.