The easiest way to start investing in property

Getting your deposit together in Deakin

You'll need at least a 10% deposit to buy an investment property, though 20% gives you more loan options and avoids Lenders Mortgage Insurance.

In our experience working with Deakin residents, many access their deposit by refinancing their current home to release equity. Consider someone living in Deakin who bought five years ago and now has $200,000 in usable equity. They could refinance and access up to 80% of their home's value, using that released equity as a deposit on an investment property without needing to save additional cash. The application involves a valuation of your current property, income verification, and a serviceability assessment that factors in both your existing home loan and the proposed investment loan repayments.

Alternatively, if you're saving cash for a deposit, lenders want to see that money sitting in your account for at least three months. Funds from a recent sale, gift, or bonus may require additional documentation showing the source. For a property priced at the Canberra median, a 20% deposit plus settlement costs would typically require around $150,000 to $180,000 depending on the specific property and associated costs like stamp duty and conveyancing fees.

How lenders assess your borrowing capacity for investment property

Lenders calculate how much you can borrow by assessing whether you can service both your current debts and the new investment loan, even if the property sits vacant.

The rental income you expect to receive gets discounted, usually by 20% to 30%, to account for vacancy periods and maintenance costs. Your existing mortgage, credit cards, personal loans, and living expenses all reduce what you can borrow. Consider a Deakin household earning $180,000 combined with an existing $500,000 mortgage. They're looking at a property that would rent for $650 per week. The lender assesses serviceability using around $455 per week of that rental income after applying a 30% discount, then tests whether the household can cover the investment loan repayments, their current mortgage, and living expenses at an assessed rate typically 3% above the actual interest rate.

This serviceability buffer matters more than it used to. Lenders tightened their assessments over the past few years, so your borrowing capacity might be lower than you expect even with strong equity and income.

Interest only or principal and interest for your first investment property

Most investors start with interest only repayments because it maximises cash flow and keeps more of your income available for other investments or paying down non-deductible debt like your home loan.

An interest only loan on an investment property means you only pay the interest charged each month, not the principal. On a $500,000 investment loan at current variable rates, the repayment difference between interest only and principal and interest is typically around $1,200 to $1,500 per month. That difference can be redirected toward your owner-occupied mortgage, which isn't tax deductible, or held as a buffer for unexpected costs like repairs or vacancy periods. Interest only periods usually run for one to five years, after which the loan either converts to principal and interest or you can request another interest only period if your circumstances still suit it.

Principal and interest repayments build equity faster and reduce your loan balance over time, but the higher repayment can strain cash flow, particularly if you're holding multiple properties or the rental market softens.

What changed with negative gearing and capital gains tax in the 2026 Budget

If you're buying an established residential investment property from 13 May 2026 onwards, the tax treatment changes from 1 July 2027.

Under the new rules, losses from established residential properties purchased after Budget night can only be offset against rental income or capital gains from residential property, not against your salary or other income. Those losses aren't lost entirely though - you can carry them forward and use them against future residential property income. When you eventually sell, the 50% capital gains tax discount is replaced with indexation based on inflation, and a minimum 30% tax applies to your gain. If you buy a new build, you can choose between the old 50% discount and the new arrangements, whichever works better for you.

These changes only apply to properties purchased after 12 May 2026, so if you already own investment property or buy before 1 July 2027, your existing arrangements are grandfathered. For Deakin residents considering their first investment property, this shifts the tax appeal toward new builds or means you need to factor in reduced tax deductions when assessing whether the numbers still work on an established property. It doesn't kill the investment case, but it does change the cash flow equation and makes after-tax returns more important to model upfront.

Choosing between variable and fixed rates on your investment loan

Variable rates give you flexibility to make extra repayments, redraw funds, and refinance without break costs, while fixed rates lock in your repayment for a set period.

Most investors prefer variable rates on investment loans because circumstances change and you might want to access equity, sell, or refinance as your portfolio grows. Fixed rates can make sense if you want repayment certainty for budgeting, but if you need to exit the fixed period early due to a sale or refinance, break costs can run into thousands of dollars depending on rate movements. Splitting your loan between fixed and variable is also an option, giving you some rate protection while maintaining flexibility on the variable portion.

Rate discounts vary significantly between lenders, and the gap between standard variable rates and discounted rates for investors can be 0.80% to 1.20%. Your deposit size, loan amount, and whether you're bundling other products like offset accounts all influence the rate you're offered.

Structuring your loan to maximise tax deductions

Keep your investment loan separate from your home loan and never redraw funds from an investment loan for private use.

The tax deductibility of your investment loan interest depends on the purpose of the borrowing, not the security. If you redraw $20,000 from your investment loan to renovate your own home, that portion of the loan is no longer deductible. The same applies if you refinance and mix investment and private debt into one facility. Set up a separate loan account for the investment property, keep it exclusively for investment purposes, and maintain clear records of every transaction. If you're using equity from your Deakin home to fund the deposit, that borrowed amount should be set up as a separate split or loan account linked to the investment property, not blended with your owner-occupied debt.

An offset account on an investment loan usually works against you from a tax perspective because the interest saved isn't deductible. You're better off using offset accounts on your home loan and letting the investment loan interest accumulate as a deduction.

Finding the right property and location for your first investment

Focus on locations with consistent rental demand, strong infrastructure, and realistic vacancy rates rather than chasing the highest potential capital growth.

Deakin residents are well positioned to understand the Canberra market, but branching interstate can diversify your portfolio and sometimes offer higher rental yields. Whether you invest locally or elsewhere, look at proximity to employment hubs, public transport, schools, and amenities that tenants prioritise. Vacancy rates below 2% to 3% indicate tight rental markets, while anything above 4% suggests you might face longer periods without tenants. Body corporate fees on apartments reduce your net rental income and need to be factored into your cash flow projections, particularly for older buildings where special levies for maintenance are more common.

Your investment loan options will also depend on the property type. Lenders apply higher interest rates and lower maximum loan to value ratios for studio apartments, serviced apartments, and properties in certain regional areas. A standard house or two-bedroom apartment in an established suburb usually qualifies for the most competitive loan products.

What happens during the investment loan application

You'll need to provide income verification, details of your existing debts, a copy of the contract of sale, and evidence of your deposit.

The lender orders a valuation to confirm the property's worth, which sometimes comes in below the purchase price, affecting your deposit requirements and loan amount. If you're using rental income from the new property to help service the loan, the lender will either use the actual lease agreement if the property is already tenanted or a rental assessment based on comparable properties in the area. Processing times vary, but most investment loan applications settle within four to six weeks if your documentation is complete and the valuation aligns with the purchase price.

If you're refinancing an existing investment loan or releasing equity from your home to fund the deposit, those applications can run in parallel or be staged depending on timing and settlement requirements.

Building a property portfolio over time

Once your first investment property is established and has gained some equity, you can use that growth to fund your next purchase.

Portfolio growth relies on serviceability as much as equity. Even if you have $300,000 in combined equity across your home and first investment property, lenders will only extend another loan if your income can service the additional debt after accounting for all your existing commitments. This is where interest only loans and high rental yields help, because they keep your committed repayments lower and leave more borrowing capacity available. Some investors accelerate their portfolio by paying down non-deductible debt aggressively between purchases, which improves serviceability by reducing monthly commitments.

Lenders also apply portfolio limits, particularly if you're holding multiple investment properties with the same lender. Spreading your loans across different lenders can keep your options open as you grow, though managing multiple loan accounts and relationships requires more administration.

If you're ready to take the next step or want to discuss how recent tax changes affect your specific situation, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions