Smart Ways to Approach Property Investment Planning

Property investment planning starts with understanding how much you can borrow, what kind of property supports your goals, and how to structure the loan so it doesn't limit your next purchase.

The decision you're making right now is whether to buy an investment property, and if so, how to set it up in a way that doesn't trap you financially or prevent you from growing a portfolio later. The most useful thing to take away is this: your first investment property should be structured to support property number two, not just to get you into the market.

How Much Can You Borrow for an Investment Property?

Lenders assess investment borrowing differently to owner-occupied loans. Your rental income is included in serviceability, but most lenders will only count 70% to 80% of it due to vacancy and maintenance costs. If you're looking at a property that rents for $600 per week, the lender might only count $420 to $480 of that toward your ability to repay the loan.

Consider someone earning $95,000 per year who wants to keep their current home and buy an investment property. Their borrowing capacity for the investment loan will depend on existing debts, living expenses, and how much rental income the new property generates. If they're targeting a property with a 5% rental yield, the rent might cover part of the repayment, but the shortfall will need to be serviced from their salary.

This is where interest-only repayments can help in the early years. Instead of paying down the principal, you're only covering the interest, which keeps repayments lower and preserves cash flow. That can make it easier to hold the property while you save for the next deposit or wait for capital growth.

What Deposit Do You Need?

Most lenders require a 20% deposit for an investment loan. If you're borrowing 80% of the property value, you avoid paying Lenders Mortgage Insurance and keep your loan to value ratio within the range most lenders prefer for investment lending.

If you already own a home with equity, you may be able to use that equity as your deposit rather than needing cash savings. In a scenario like this, a buyer with $150,000 in usable equity could access that through refinancing or a separate loan, then use it as the deposit on an investment property without selling or disrupting their current living situation.

Using equity can speed up your entry into the investment market, but it also increases your total debt and the amount you're paying in interest across both properties. It's worth running the numbers with a broker to understand how much equity you can safely access without over-leveraging.

How Budget Changes Affect New Investors from July 2027

If you're buying an established residential investment property from 13 May 2026 onwards, two major tax changes will apply from 1 July 2027. The 50% capital gains tax discount will be replaced with a discount based on inflation, and a minimum 30% tax will apply to capital gains. Negative gearing deductions will also be restricted so that losses from the property can only be offset against rental income or capital gains from residential property, not against your salary or wages.

These changes don't apply to properties purchased before Budget night, and they don't apply to new builds. If you're planning to buy a brand new property or one under construction, you'll still have access to the 50% capital gains discount or the new inflation-indexed arrangements, whichever works out better for you. Negative gearing will continue to work as it always has for new builds.

This has shifted the conversation for many investors. Established properties in areas with strong rental demand and low vacancy rates are still viable, but the tax benefits are reduced if you're buying after the Budget. New builds now carry a stronger advantage, particularly if you're planning to hold the property long-term and want to maximise tax deductions and minimise capital gains tax when you eventually sell.

Choosing Between Variable and Fixed Rates for Investment Loans

Investment loan interest rates are typically slightly higher than owner-occupied rates, and the structure you choose affects both your repayments and your flexibility. A variable rate lets you make extra repayments, redraw funds, and refinance without penalty. A fixed rate locks in your repayment amount for a set period, which can help with budgeting if you're managing multiple properties or want certainty around cash flow.

Some investors split their loan, fixing part of it and leaving the rest variable. This gives you some protection against rate rises while still allowing access to features like redraws and offset accounts on the variable portion. If you're planning to use rental income and salary to fund the shortfall each month, knowing exactly what that shortfall will be for the next few years can make financial planning more predictable.

You won't get the same rate discounts on investment loans that you might see advertised for owner-occupiers, but there's still room to negotiate depending on your deposit size, the strength of your application, and the lender you're working with.

Structuring Your Loan to Support Portfolio Growth

How you structure your first investment loan determines how much borrowing capacity you'll have left for your second property. If you take out a principal and interest loan on a 30-year term and make minimum repayments, your debt reduces slowly but your cash flow is tighter. If you choose interest-only for the first five years, your repayments are lower, which improves your serviceability when applying for the next loan.

As an example, someone with a $500,000 investment loan at a variable interest rate on interest-only terms might pay around $2,100 per month in interest. On principal and interest, that same loan could cost closer to $2,800 per month. That $700 difference each month affects how much you can borrow next time, because lenders assess your ability to service future debt based on your current commitments.

If your plan is to build a portfolio of multiple properties over time, structuring each loan to preserve serviceability is more important than paying down debt quickly. You can always switch to principal and repayments later, or make lump sum payments when you have surplus cash.

Tax Deductions and Claimable Expenses

One of the reasons property remains attractive for building wealth is the range of tax deductions available to investors. Loan interest, property management fees, council rates, insurance, repairs, and depreciation on the building and fixtures can all be claimed. These deductions reduce your taxable income, which can result in a tax refund or a lower tax bill at the end of the year.

Under the current rules for properties purchased before 13 May 2026, if your property costs more to hold than it earns in rent, that loss can be offset against your salary. From 1 July 2027, properties purchased after Budget night will only be able to offset those losses against other residential property income, but you can carry the loss forward to future years.

Depreciation is one area that's often overlooked. A quantity surveyor can prepare a depreciation schedule that identifies all the claimable items in your property, from carpet and blinds to hot water systems and air conditioning. This can add thousands of dollars in deductions each year, particularly on newer properties.

Refinancing an Investment Loan

Your investment loan doesn't need to stay with the same lender forever. If your property has increased in value, your income has grown, or you've paid down some of the principal, refinancing can give you access to better rates, different loan features, or additional equity to fund your next purchase.

Some investors refinance to consolidate debt, switch from interest-only to principal and interest, or move to a lender that offers better serviceability calculations for their rental income. Others refinance to access equity that's built up over time, using that equity as the deposit for a second or third property.

Refinancing does come with costs, including discharge fees from your current lender and application fees with the new one, so it's worth checking whether the savings or benefits justify the switch. A loan health check can help you understand whether your current loan is still competitive or whether there's value in making a change.

Planning your property investment around how the loan is structured, how much you can borrow, and how the numbers work after tax gives you a much clearer picture than just looking at purchase price and rent. Call one of our team or book an appointment at a time that works for you to talk through your situation and build a plan that fits your goals.

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