Across Australia, there’s an emerging conversation among parents, exploring the option of purchasing an investment property while their children are still young as a way to secure their future position in the property market.

But is it smart planning or financial overreach?

Here’s how it can work, how loans are structured, and the real pros and cons to consider.

Why Parents Are Thinking This Way

Housing affordability conversations are being heavily influenced by ongoing rate decisions from the Reserve Bank of Australia, limited housing supply and strong price growth in many capital cities.

Parents are seeing:

• Rising median house prices
• Increasing deposit requirements
• Rent costs climbing
• Borrowing capacity tightening

People are thinking that if this continues, there is no way that the future generations will have any chance of buying their own home in the same way that they did. It’s possible that we are rapidly approaching the extinction of the traditional first home buyer, as affordability starts to bite.

How Buying an Investment Property for Your Child Could Work

Important clarification:

You generally cannot put the property in your children’s name(s) while maintaining normal lending and tax efficiency.

Instead, if this is something you’re seriously considering and you have the financial means to do so – you could structure it one of the following ways:

Option 1: Buy in Your Own Names (Most Common Strategy)

You purchase an investment property in your own name (or jointly), using a standard investment loan.

Structure:

• 10–20% deposit (or equity release from your home)
• Investment loan (interest-only often preferred early)
• Tenant covers part of repayments
• You hold for 15–20 years

Later, when your child is an adult, you may:

• Sell the property and gift proceeds
• Transfer ownership (triggering stamp duty + CGT)
• Use equity to act as guarantor for them

This is the simplest and most flexible approach.

Option 2: Buy via a Trust Structure

Some families use a discretionary (family) trust.

Potential benefits:

• Asset protection
• Income distribution flexibility
• Estate planning advantages

However:

• Lending is more complex
• Setup and accounting costs are higher
• Banks assess servicing differently

You should always coordinate this with your accountant and potentially refer to guidance from the Australian Taxation Office regarding capital gains tax and trust obligations.

Option 3: Debt Recycling Strategy

If you have a home loan already, you may:

• Split your loan
• Use equity to fund an investment purchase
• Convert non-deductible debt into deductible investment debt over time

This strategy can accelerate long-term wealth building but must be structured carefully.

How Would You Transfer It in 15–20 Years?

This is where many parents misunderstand the mechanics.

There are typically 3 pathways:

Sell & Gift Proceeds

• Most tax-efficient in many cases
• Clean and simple
• Capital gains tax applies

Transfer Ownership

• Stamp duty may apply
• Capital gains tax event triggered
• Often not the most efficient option

Keep It & Act as Guarantor

Instead of transferring it, you use the equity to support your child’s first purchase.

This is often the most strategic outcome.

You can read about how guarantor loans work here.

The Clear Pros

• Locks in today’s prices
• Leverages time and compounding growth
• Tenant contributes to holding costs
• Provides flexibility in future
• Builds family wealth regardless of child’s plans

The Clear Cons

• Interest rate risk
• Vacancy risk
• Capital gains tax implications
• Opportunity cost (tying up capital)
• No guarantee property outperforms other investments

Once you weigh it all up, this is not a “set and forget” emotional decision but rather, a long-term financial commitment.

oung children Alternative Ways to Help Your Child Into Property

If buying now feels aggressive, consider these alternatives:

Guarantor Loans

Parents can use equity in their home to help children buy with smaller deposits.

This can eliminate LMI and accelerate entry.

Offset Account Strategy

Instead of buying now:

• Save aggressively in an offset account
• Reduce your own non-deductible debt
• Build a lump sum to gift later

Co-Purchasing When They’re Older

Some families buy jointly with adult children:

• Shared ownership
• Clear legal agreement
• Planned exit strategy

Structured Savings & Investment Plan

Instead of property, some families invest in diversified portfolios over 15–20 years, maintaining liquidity and flexibility.

The Key Question

Before purchasing an investment “for your child,” ask:

• Does this strengthen our current financial position?
• Are we comfortable holding through market cycles?
• Is this aligned with our retirement strategy?

Because ultimately, your financial stability is what protects your children most.

Who Is This Strategy Right For?

Typically:

• Stable dual-income households
• Strong equity position
• Long-term horizon (15+ years)
• Comfortable with investment risk

It is not the time to get caught up in social media hype. If you want to build generational wealth, it requires a careful strategy that aligns with your retirement goals and of course your current borrowing capacity.

If you can afford to, buying an investment property, we are a mortgage broker in Perth who would spend the time to understand your:

• Borrowing capacity
• Equity release options
• Long-term servicing impact; and
• Exit strategies

Book a strategic planning session to see whether buying now positions your family ahead — or whether another pathway makes more sense.