Property Investors

Buying an investment property involves two separate decisions: whether the property itself is an appropriate investment, and how the purchase should be financed. My role as a mortgage and finance broker is focused on the second question — how the lending works, what a lender may be prepared to accept, and how the finance can be structured around your current position and future plans.

Investment lending is assessed differently from a simple owner-occupied purchase. The lender may consider existing home and investment loans, rental income, living expenses, other debts, the proposed property, the loan-to-value ratio, the repayment type, and your total level of debt relative to income.

The structure also matters after settlement. How equity is released, how loan splits are used, whether funds are mixed with private borrowing, and whether properties are cross-collateralised can all affect flexibility later. Tax consequences can also arise from the purpose for which borrowed funds are used, which is why tax advice should be obtained where required.

A useful first step is to separate the investment decision from the finance decision. Before choosing a property, understand what deposit or equity is available, how much lenders may recognise as borrowing capacity, and how the new debt would affect your cash flow if interest rates rise or the property is vacant.

Investors also need to think beyond the next settlement. A structure that works for the first investment property can become restrictive when a second or third property is added. Preserving flexibility, clean loan-purpose records and access to more than one lender can become increasingly important as the portfolio grows.

A 20% deposit is a common starting point because an 80% LVR will usually avoid Lenders Mortgage Insurance, subject to the lender and property. It is not an absolute rule — some lenders can consider investment lending above 80% LVR, with LMI, stronger pricing or other restrictions depending on the application.

The deposit is only one part of the cash required. Stamp duty, conveyancing, inspections, lender costs and a cash buffer also need to be considered. Investors should not assume rental income will cover every ongoing cost from the first day.

Potentially. Equity is the difference between a property's value and the debt secured against it. “Usable equity” is the amount a lender is prepared to let you access after applying its LVR and serviceability rules.

A common illustration is to calculate 80% of the lender-accepted property value and subtract the existing loan.

That figure is not an approval. A lender may value the property differently, use a different maximum LVR, or limit the additional borrowing because of serviceability. The released funds also need to be structured carefully if they will be used for an income-producing purpose.

Rent can help serviceability, but lenders do not all assess it the same way. For an existing tenanted property they may use the lease or account history; for a new purchase they may use a rental appraisal or valuation evidence.

Lenders commonly apply their own adjustment to rental income to allow for vacancy and property expenses rather than assuming every dollar of gross rent is available for loan repayments. The treatment of short-term rental income, boarder income, commercial rent and related-party leases can differ materially between lenders.

An investor can have substantial equity and still be unable to borrow the amount required for the next purchase. Serviceability includes the repayments on existing loans, other debts, living costs, rental income and the lender's assessment rate.

In 2026, APRA-regulated banks must apply at least a 3 percentage point serviceability buffer to housing loans. APRA has also limited the proportion of new investment lending an ADI can fund at a debt-to-income ratio of six times or more. Individual lender policy can be more restrictive than the regulatory minimum.

This is why the lender that worked well for the first investment is not automatically the lender that will produce the strongest outcome for the next one.

Interest-only repayments can reduce the required repayment during the interest-only period because the borrower is not reducing principal. That can improve short-term cash flow, but the loan balance does not fall from scheduled repayments and investment interest-only rates can be priced differently.

When the interest-only period ends, repayments can increase because the remaining principal must be repaid over the shorter remaining loan term. A borrower considering interest-only should understand both the current repayment and the future principal-and-interest repayment.

Whether an interest-only structure is appropriate depends on cash flow, investment objectives, lender criteria and tax circumstances — it should not be chosen solely because the initial repayment is lower.

Lenders classify loans according to purpose and occupancy. Investment loans can have different pricing, assessment and policy from owner-occupied loans. If the use of a property changes, the lender should be told where required and the finance reviewed.

The purpose for which borrowed money is actually used is also important for tax deductibility. Simply securing a loan against an investment property does not automatically make all interest deductible if some of the borrowed funds are used privately.

For tax purposes, the use of borrowed money matters. The ATO states that if an investment loan is refinanced or redrawn and part of the funds are used for a private purpose, the interest may need to be apportioned between deductible and non-deductible use.

This can make the distinction between an offset account and a redraw facility important. Moving personal cash in and out of a genuine offset account is different from paying down a loan and later redrawing those repayments as new borrowing. Investors should obtain tax advice before changing or mixing loan purposes.

Separate loan splits can make it easier to identify the purpose of each borrowing, manage repayments and preserve flexibility. This is particularly relevant where a homeowner releases equity for the deposit and costs of an investment property.

Cross-collateralisation occurs when more than one property is tied to the same lending structure as security. It can sometimes be workable, but it may also reduce flexibility when selling, refinancing or moving one property to another lender. The advantages and disadvantages should be considered before the structure is created, not only when the investor later wants to change it.

Investors may refinance to review pricing, change repayment structure, extend or alter loan features, release equity or position the portfolio for another purchase. The lowest rate is not the only consideration.

Before refinancing, it is important to consider switching costs, remaining fixed or interest-only periods, valuation, serviceability, the future lender strategy, and whether any equity release is being used for an investment or private purpose. A refinance that mixes private and investment borrowing can create ongoing record-keeping and tax consequences.

Negative gearing describes a situation where deductible investment-property expenses exceed the income generated by the property. Historically, eligible rental losses could generally be offset against other assessable income, subject to tax law.

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 changed the future treatment of residential property. Existing arrangements are preserved for residential investments made before 7:30pm AEST on 12 May 2026. From the 2027–28 income year, losses on established residential investment property acquired after that time are generally limited to offsetting residential-property income rather than broader income such as salary, with excess losses able to be carried forward. New builds retain access to the broader negative-gearing treatment under the reform.

The same 2026 legislation also changes the future CGT treatment of assets. Because these rules are complex and can materially affect investment decisions, this page explains the general change but does not provide personal tax advice — a registered tax adviser should be consulted about your specific circumstances.

Investment property can be owned through different structures, but the lending requirements can change materially. Trust and company applications may involve guarantees, financial documents and lender-specific policies that differ from an individual borrower application.

SMSF property borrowing is a separate specialist area. Borrowing through an SMSF must comply with strict limited-recourse borrowing rules, carries additional costs and complexity, and requires appropriate licensed advice. It should be treated as its own finance topic rather than a simple variation of a standard investment home loan.

For property investors, mortgage broking is not only about finding a loan for one purchase. It can involve understanding usable equity, comparing how lenders assess rental income and existing debt, structuring loan splits, reviewing interest-only and principal-and-interest options, and preserving flexibility for future purchases. My role is to explain the lending options, coordinate the application, and help structure the finance around what you are trying to achieve, while leaving investment and tax advice to the appropriate advisers.