By buying an investment property, you can potentially earn a great rental income, a capital return and take advantage of tax benefits like negative gearing.

More first home buyers than ever are choosing to invest in property rather than buying an owner-occupied property or choosing to “rentvest” instead.

By getting the right information and applying with the right lender, you’ll have a better property investing experience.

Why should you consider property investment?

  • Australia doesn’t have very restrictive investment laws or banking regulations like some other countries.
  • Most bank regulations in Australia are nation-wide not state by state.
  • Mortgage brokers in Australia often provide free services for residential loans.
  • Investment loans are highly-leveraged which means you can maximise your potential returns by only having to provide 5-10% of the property value as a deposit upfront.
  • There are many tax benefits you can take advantage of if you have the right strategy in place and get the right financial advice.

Borrow 100% for an investment property

There are generally two ways you can borrow 100% for buying an investment property. They are:

  • Guarantor loan for investment: Your parents can use their property to secure your investment loan. This will allow you to borrow up to 105% of the property price and you won’t need to pay Lenders Mortgage Insurance (LMI).
  • Another property as security: If you already own property then you can use the equity in your existing property as a deposit for the new investment purchase. You can borrow 100% or 105% of the property value depending on the lender you apply with.

Without a guarantor or equity in another property, you’ll be limited to borrow a maximum of 95% of the property value.

Need help getting approval for a 100% investment loan?

Our mortgage brokers specialise in getting tough investment situations approved. They can help you find the right lender from our list of almost 40 lenders.

Contact us on 1300 889 743 or complete our free online assessment form to speak with one of them about your situation today!

Who should buy an investment property?

Basically, you should get an investment loan if you’re buying an investment property.

Most property investors are professionals who earn high taxable incomes and are in a strong financial situation.

Is property investing for me?

Buying an investment property can be quite expensive. Especially if you’re borrowing at a high loan to value ratio (LVR).

For instance, an investment loan at 95% LVR is only suitable if you’re in a strong financial position and have a good credit history.

Someone with a poor credit history isn’t suitable for an investment loan as you won’t make a decent return on your investment.

Also, if you’re a foreign investor then you may need an approval from the Foreign Investment Review Board (FIRB). You can get more information about this on our FIRB page.

Call us on 1300 889 743 or complete our free online assessment form and speak with one of our brokers about your options.

What else can I invest in?

Other than property, you can also use your investment loan to invest in shares, managed funds, options or business.

Lenders generally accept all investment purposes, as long as they’re legal.

Buying An Investment Property FAQs

How does negative gearing work?

Simply put, negative gearing is the loss you make when the sum of your interest and running costs is greater than your investment income.

Effectively, the aim of this strategy is to get into the market early and increase your investment income over time to cover your expenses.

Meanwhile, you can claim the net loss as a tax deduction against your other income.

It’s recommended that you always seek independent financial advice from your accountant or a financial expert before deciding on an investment strategy.

What other factors affect my serviceability?

Every lender uses their own method to calculate your investment property borrowing power.

Generally, lenders will take into account your:

  • Gross income: Your gross income includes all of your base income, as well as overtime, bonuses, commission, tax-free income and rental income.
  • Tax or medicare: Every lender has different ways to assess your tax and medicare payments.
  • Negative gearing benefits: Most lenders consider negative gearing benefits when calculating your serviceability. This means that, normally, investors will be able to borrow more than home buyers.
  • New mortgage: Lenders generally assess the repayments of your new loan at a higher assessment rate, usually 1% to 3% higher than the actual interest rate you’ll pay.
  • Existing commitments: Lenders take several factors into account when assessing your existing commitments, including existing mortgages, credit cards and personal loans. Some lenders will include notional rent, minimum estimated rent, when assessing your loan application.
  • Living expenses: Banks use either your estimated living expenses or their calculation of the minimum expenses for a family of your size, whichever is higher.

What documents do I need to prepare for taxes?

Setting aside the documents you’ll need from the start will help you prepare for when you do your taxes.

Most property investors normally procrastinate talking with their accountant until the next year when they do their taxes. As a result, they end up wasting valuable time to find the right documents and figures.

You can provide all of your documents to your accountant at the start and let them take care of it. Many professional investors provide their accountants with a summary of the income and expenses for their property.

This can not only help you reduce your accounting fees but you can check your cash flow position with the property, identifying abnormally high expenses in the process.

You can use our investment property spreadsheet template to give your accountant the required figures.

What if I get an offset account?

From a tax perspective, you could be at a disadvantage if you get an ordinary mortgage. You would only be able to claim the interest on the loan balance at that time as the tax deductible interest.

For instance, suppose you have a balance of $250,000 remaining on a $1,000,000 mortgage that you’ve been diligently paying off. One day you redraw $200,000 for deposit to buy an apartment to live in and rent out your last property.

Your new loan would be $450,000, however, the deductible investment loan interest would be limited to the interest on the previous $250,000 loan balance.

How can an offset account help?

Offsets for investment loans are like extra bank accounts that are linked to your loan account. Any excess repayments you make can be deposited in this account.

Although this account doesn’t earn any interest, the lender will include the balance in this account when calculating your loan interest.

For example, if you have a $1,000,000 loan and $300,000 in your offset account, the bank will calculate your loan interest only on $700,000. This will give you a much better tax result.

Disclaimer: This is general information only and shouldn’t be taken as tax advice. It’s recommended that you speak with your accountant for professional tax advice.

You can call us on 1300 889 743 or fill in our free online assessment form if you would like further information on buying an investment property.

  • Duff

    My brother and I are thinking of investing in a property together so how much can we borrow?

  • Hey Duff,

    As long as you and your brother are both in a good financial position, have a high income and stable employment, you may be able to borrow up to 90% of the property value. Select lenders may also be able to allow you to borrow up to 95%.

  • patterson

    What if I want to invest in a commercial property? Will I be able to get home loan rates for this?

  • Yes, you can invest in commercial property, and yes, you can potentially get a home loan rate when you buy a freehold commercial property. We have a whole page on commercial investment loans so please have a look at it to learn more:

  • Justin

    My parents are looking to downsize at retirement and would like to buy an apartment to live in. Is it possible to transfer the loan portion used on this new apartment, to the current family home (fully owned) to be able to use the interest paid as a tax deduction as it switches to an investment property, assuming the loan is portable?

  • Hi Justin,
    When you determine if a loan is tax deductible or not you need to look at what it was used for not what it is secured against. So if the loan was used to buy a property that is then used as a home then the loan is not tax deductible unfortunately.

    Some people choose to sell their old family home and then get a loan when they buy a new investment property in it’s place that way it’s still tax deductible. This is very common where the family home was high maintenance (big gardens etc).

    I’m not an accountant so please seek financial & tax advice before making any decisions.

  • Fendley

    Hello, I’m a vet and I heard that people in our profession may be able to avoid mortgage insurance. Is this true?

  • Hey Fendley,

    Yes, that’s true. LMI can be quite expensive and works out to be around $24,000 for a 90% loan on a $1,000,000 property. However, two of our lenders can consider waiving LMI for vets, allowing you to buy multiple investment properties or to get your foot into the property market sooner. Please call 1300 889 743 if you’d like to discuss things directly with an expert vet home loan specialist.

  • hardy

    How much commission income do banks generally accept when applying for a mortgage?

  • Hi hardy,
    It’s common among many lender to accept just 50% of your commission income. Note that if there’s a sign of inconsistency then many lenders will not accept any of your income. This can even occur simply because you took a holiday or because of a normal seasonal dip in sales. However, we know lenders that may be able to accept 100% of your commission income, depending on your circumstances.

  • ramblertoo

    Hi, how much equity is necessary from a personal mortgaged property valued at $200,000 to pay a deposit and open a mortgage/loan for a $300,000 investment property.

  • Hi Rambler
    You need around $30,000 – $45,000 to buy an investment property for $300,000. So let’s assume you refinance your $200,000 property to 90% of the property value ($180,000) then that means you’d need to owe $150,000 or less. Ideally around $115,000 or less owing would make it an easy process.

  • Warrington

    Hi, I’ve got $1.5 mils in the bank and I own 3 properties, out of which 2 are free of debt. Right now, I’m living rent free and on rental income, no job. I want to buy another investment property for $1.8 mils and I’m finding it difficult to find a bank that will lend. Help!

  • Hey Warrington.
    Not having a job can be an issue with banks so we’ll need to find a lender that can accept your rental income fully. As long as the rent can service the mortgage, they may not mind rent reliance. If this is difficult then there are also other solutions that we have in mind. So please call 1300 889 743 to discuss this with an expert investment mortgage specialist or simply enquire online and we’ll contact you soon:

  • Adeeb

    Hi I wanna buy a investment property but my credit score os under 600 but my regular income is $130000 annualy could u plz let me know can i buy investment property with 5% deposit , thanks

  • Yes we can assist with a 95% investment loan. However you’d need a larger deposit (approx 10% – 12%) as a 5% deposit wouldn’t cover the purchasing costs and cost of LMI.

  • Michelle Ireson Wood

    I want to act as guarantor for my daughter to buy an investment property – I own my house outright and can easily cover the deposit she would have otherwise had to put down but we are finding it very hard to find a lender for an investment property with a guarantor after the banking restrictions came in – the big 4 seem to be shying away from guarantor + investment – any ideas?

  • Hi Michelle,

    There’s been a few changes to guarantor loans under the new banking code of practice effective 1 July 2019. One of the changes has been the establishment of ‘substantial benefit’ policy under which banks need to establish substantial benefit for all borrowers/guarantors, and in this case, the banks may have considered the primary loan purpose was for your daughter solely as it’s for an investment property and not a PPOR (primary place of residence). Our specialist mortgage brokers can help you find an alternative lender that’s willing to help you out. In fact, some of our lenders can still lend up to 105% of the investment property with a guarantor. Please give us a call on 1300 889 743 or fill in our online assessment form: to discuss your situation.