Buying an investment property in Australia.
Property investment is one of Australia's most popular wealth-building strategies. Understanding loan structuring and tax implications is essential before you start.
Building your property portfolio.
Investment property finance is more complex than owner-occupied lending. The right loan structure can make a significant difference to your after-tax returns.
Define your strategy
Capital growth vs rental yield â know your goal.
Structure your loan
Interest-only, P&I, or split â each has tax implications.
Use your equity
Tap equity in your home to fund the deposit.
Find the property
Research markets with strong rental demand.
Manage & review
Regularly review your loan against the market.
How your loan is structured matters.
Investment loan structuring is where a good mortgage broker earns their stripes. The difference between a well-structured and poorly-structured investment loan can be tens of thousands of dollars over time.
- Interest-only (IO) loans reduce your repayments and maximise negative gearing benefits
- Keep your investment loan separate from your owner-occupied loan to preserve tax deductibility
- Offset accounts on your home loan reduce interest while preserving investment loan deductibility
- LVR up to 90% is available for investment properties, but LMI applies above 80%
- Rental income counts towards your borrowing capacity â typically at 70â80% of gross rent
Common questions.
IO loans are popular with investors because they minimise repayments and maximise cash flow during the IO period. The interest is also generally tax-deductible against rental income. However, at the end of the IO term your repayments increase significantly. The right choice depends on your cash flow, tax position, and long-term strategy.
Yes â this is the most common way Australians fund their first investment property. The equity in your owner-occupied home can be accessed via a loan top-up or line of credit to fund the investment deposit. It's important to keep the loans completely separate to preserve the tax deductibility of the investment loan interest.
Negative gearing occurs when the expenses of owning an investment property (loan interest, rates, maintenance, agent fees) exceed the rental income. The resulting loss can be offset against your other income, reducing your income tax. Your tax savings depend on your marginal tax rate â generally the higher your income, the greater the benefit. Always consult a tax professional for personalised advice.
Get your investment loan structured right.
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