Simple hacks to start investing in property

Investing in property creates a pathway to passive income and long-term wealth, but knowing where to begin often feels more complex than it needs to be.

The decision you're making isn't just about whether to invest, it's about how to structure your first purchase so it works financially from day one. That means understanding how much deposit you'll need, which loan structure suits your tax position, and what lenders actually look for when assessing investment applications. Getting these foundations right determines whether your first property becomes a platform for expanding your property portfolio or a financial burden you didn't anticipate.

How much deposit do you actually need for an investment loan?

Most lenders require a 20% deposit to avoid Lenders Mortgage Insurance, though some will lend with as little as 10% if you're prepared to pay the LMI premium. The difference between these two scenarios affects both your upfront costs and your borrowing capacity going forward.

Consider a buyer looking at an apartment priced near the median in an established suburb. With a 20% deposit, they avoid LMI entirely and retain stronger borrowing capacity for future purchases. With a 10% deposit, they pay an LMI premium that typically ranges from a few thousand dollars to over $10,000 depending on the loan amount, and that premium gets added to the loan rather than paid upfront in most cases. The choice isn't about which option is right or wrong, it's about which one aligns with your timeline and cash flow.

If you already own a home, you might refinance to release equity rather than saving cash. Equity release allows you to use the value built up in your existing property as a deposit for the investment, though lenders will still assess your ability to service both loans simultaneously.

What loan structure works for property investors?

Interest-only repayments appeal to many investors because they reduce monthly outgoings and maximise tax deductions, as the full interest portion remains claimable. Principal and interest loans build equity faster but result in higher repayments and a smaller tax deduction over time.

In our experience, investors with strong income and a focus on cash flow often start with interest-only terms for the first few years, then switch to principal and interest once rental income increases or their financial position strengthens. Lenders typically offer interest-only periods of up to five years on investment loans, after which the loan reverts to principal and interest unless you negotiate an extension.

Your choice between variable and fixed rates also matters. Variable rates allow you to make extra repayments without penalty and benefit from rate cuts when they occur, while fixed rates provide certainty over repayment amounts for a set period. Some investors split their loan between fixed and variable to balance flexibility with predictability.

How do lenders assess your investment loan application?

Lenders evaluate investment loans differently than owner-occupied home loans. They factor in rental income, but not at 100% of the stated rent. Most lenders apply a discount of around 20% to account for vacancy periods, maintenance costs, and potential arrears, meaning they'll assess 80% of the expected rental income as part of your serviceability.

Your borrowing capacity also depends on how lenders treat your existing debts. If you own a home with a mortgage, that repayment counts against your income even if tenants will cover the new investment loan repayments. Some lenders assess investment loans at a higher interest rate buffer than owner-occupied loans, which can reduce how much you can borrow.

As an example, someone earning a solid income with minimal personal debts might find they can borrow more for an investment property than someone with the same income but higher credit card limits or personal loan commitments, even if those credit cards carry a zero balance. Lenders assess the limit, not the balance.

Which property type suits a first-time investor?

Apartments in established suburbs often attract first-time investors because the entry price sits lower than houses, and rental demand tends to be consistent near transport, universities, or employment hubs. The trade-off comes in the form of body corporate fees, which reduce your net rental income and need to be factored into your cash flow projections.

Houses in growth corridors appeal to investors focused on capital growth over immediate rental yield, though vacancy rates in some outer suburbs can be higher during economic downturns. Choosing the right property type depends on whether your priority is income, growth, or a balance of both.

Rental yields vary significantly by location and property type. An apartment close to public transport might deliver a 4.5% yield with steady demand, while a house in an outer suburb might return 3.8% but offer stronger long-term growth prospects. Your investment loan serviceability depends on that rental income holding up, so understanding local vacancy rates and demand drivers matters more than national trends.

What costs should you budget beyond the deposit?

Stamp duty represents your largest upfront cost after the deposit, and unlike owner-occupied purchases, investment properties don't qualify for first home buyer concessions or exemptions. Conveyancing, building and pest inspections, and loan establishment fees add another few thousand dollars to your settlement costs.

Ongoing costs include council rates, water rates, landlord insurance, property management fees if you're using an agent, and body corporate fees for apartments or townhouses. These expenses are tax-deductible, but they still need to be funded from your cash flow each quarter.

Negative gearing allows you to offset the shortfall between rental income and total property expenses against your other taxable income. Under recent legislative changes, negative gearing deductions for established residential properties purchased after 12 May 2026 will be limited from 1 July 2027, meaning losses can only be offset against rental income or capital gains from residential property, not against wage income. If you're buying your first investment property, understanding how these tax changes affect your cash flow projections is part of the planning process.

How do capital gains tax changes affect your investment?

From 1 July 2027, the 50% capital gains tax discount will be replaced with inflation-based indexation for established properties purchased after 12 May 2026, along with a minimum 30% tax on capital gains. Properties purchased before that date remain under the existing rules, and investors in new builds can choose whichever calculation delivers the lower tax outcome.

The distinction between established and new properties now carries a direct financial consequence that extends beyond the purchase itself. If you're weighing up an established apartment against a newly completed unit, the capital gains treatment over a 10 or 15-year hold period could shift the overall return by tens of thousands of dollars, depending on how much the property appreciates and how inflation tracks over that time.

This doesn't make established properties unviable, but it does mean your investment strategy needs to account for the tax outcome at the point of sale, not just the income and growth during ownership. Speaking to a tax professional or financial adviser before committing to a purchase gives you a clearer picture of how these rules interact with your specific circumstances.

When should you speak to a broker about investment loans?

Before you start attending inspections or making offers, understanding your borrowing capacity and which lenders suit your circumstances saves time and prevents disappointment. Different lenders assess rental income, existing debts, and employment types in different ways, and knowing which ones align with your situation means you're not applying blindly.

A broker with access to investment loan options from banks and lenders across Australia can also identify features that matter for investors, such as offset accounts that reduce interest on variable portions, portability that lets you move the loan to a different property, or the ability to capitalise LMI rather than paying it upfront.

If your goal is to build a portfolio over time, the structure of your first loan affects how much capacity you'll have for the second and third properties. Setting that up correctly from the beginning makes the path forward far more accessible.

Call one of our team or book an appointment at a time that works for you. We'll walk through your current position, outline your investment loan options, and help you structure your first property purchase in a way that supports both immediate cash flow and long-term portfolio growth.

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