Your investment loan structure matters as much as the property you buy. For Richmond investors, the decisions that shape your results are how much a lender will let you borrow, how you repay it, and how new tax rules treat your rental losses.
This article walks through each of those decisions in the order you will face them.
How Much Can You Borrow for an Investment Property?
Your borrowing power depends on your income, your debts and how the lender treats the rent. Banks must test whether you could still afford the loan if rates were 3.0 percentage points higher than the loan's rate.
That buffer is an APRA requirement for banks, credit unions and building societies. Non-bank lenders are not bound by it, which is one reason lender choice affects your result.
Rent helps, but only part of it counts. APRA expects lenders to count no more than 80 per cent of expected rent, because homes sit empty between tenants. A rental appraisal is also likely to carry less weight than actual rent received.
APRA also limits how much of each bank's new lending can go to borrowers whose debt is six times their income or more. That is a limit on the bank's whole portfolio, not on you personally, but it can make a bank cautious with highly geared applications. Our borrowing capacity page is a good place to test your numbers before you inspect anything.
Interest-Only or Principal and Interest: Which Suits an Investment Loan?
Interest-only repayments are lower in the early years, but you do not reduce the loan balance during that period. Principal and interest repayments cost more each month and steadily pay the debt down.
Consider an investor with a $600,000 loan. Using an illustrative rate of 6.75% p.a., interest-only repayments are about $3,375 a month. A 30-year principal and interest loan at the same rate is about $3,892 a month.
Now suppose the investor takes five years interest-only. After that, the loan reverts to principal and interest over the remaining 25 years, and the repayment rises to about $4,146 a month, because the full $600,000 must be repaid in a shorter time.
The outcome is a lower cash outlay for five years, followed by a repayment step-up of roughly $771 a month. Lenders also assess interest-only borrowers on the later principal and interest repayment over the shorter remaining term. So interest-only does not increase how much you can borrow, and it can reduce it.
On tax, only the interest portion of a repayment is deductible under either structure. The principal portion is not. Speak with your accountant about how this applies to you.
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How Do LVR and LMI Affect Your Investor Deposit?
Your loan to value ratio (LVR) is the loan divided by the property's value. Once it passes 80 per cent, lenders generally require Lenders Mortgage Insurance (LMI).
The 80 per cent mark is not a legal borrowing cap. It is the point where a lender needs insurer approval as well as its own, and each lender sets its own limits. The premium is paid by the borrower, and it grows with the loan amount and the LVR.
The trade-off is plain. A smaller investor deposit lets you buy sooner, but you carry a larger loan and pay the premium. Waiting to save more reduces both. If you hold equity in a home you already own, refinancing to release equity can fund the deposit, though it increases your total debt. Whether LMI can be avoided or reduced depends on your occupation and the lender, so check our LMI waivers page.
How Negative Gearing Changes for Property Bought After 12 May 2026
For established homes bought after 7:30pm AEST on 12 May 2026, rental losses will only offset other residential property income from the 2027-28 income year. Losses that cannot be used straight away carry forward to future years.
Properties held at that time, including those under contract awaiting settlement, keep the existing treatment, where losses can be deducted against other income. Eligible new builds acquired after that date can also keep deducting losses against all income. Established properties bought between that date and 30 June 2027 can use the current rules until 30 June 2027 only.
In practice, a Richmond investor buying an established property should not rely on a salary offset to carry the loan. Build a budget where the rent, plus your own cash flow, covers repayments and holding costs. The tax change affects how a loss is used, not whether interest is deductible. Have your accountant confirm how it applies to your circumstances before you sign a contract.
What Richmond's Rental Profile Means for Your Property Investment Strategy
Richmond sits in the City of Yarra, about 3 km from the CBD, and around 56 per cent of homes were rented at the 2021 Census. A high share of renters suggests an established rental market, but lenders assess your rental income under their own policies, usually counting no more than 80 per cent of expected rent.
SQM Research put Melbourne's rental vacancy rate at 1.9% in September 2026. That is a metro figure, not a Richmond figure, so use it as background rather than a forecast for any one street or building.
If you are weighing up a first purchase, our guide to buying your first investment property covers the early decisions. Local advice also helps, and our Richmond mortgage broker page explains how we work with investors in the area.
Apartments in strata schemes carry body corporate fees, which reduce your net rent. Include them in your cash flow before you compare loan options.
To compare investment loan options across lenders and test your repayments at different structures, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Does an interest-only investment loan increase how much I can borrow?
No. Lenders assess interest-only loans on the principal and interest repayment over the remaining term after the interest-only period. This can mean a lower maximum loan than a standard principal and interest loan.
How much of my expected rent will a lender count?
APRA expects lenders to count no more than 80 per cent of expected rent. Lenders may also place less weight on a rental appraisal than on rent actually received.
When is Lenders Mortgage Insurance usually required for an investment loan?
LMI is generally required when the loan to value ratio is above 80 per cent. The premium is paid by the borrower, and each lender sets its own lending limits.
How does negative gearing change for properties bought after 12 May 2026?
From the 2027-28 income year, losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only offset other residential property income. Eligible new builds are treated differently, so speak with your accountant.
