Property has long been one of the most popular ways Australians build wealth. But an investment loan is different from a home loan in a few important ways, from the rates lenders charge to how they assess rental income. This guide covers what you need to know before buying your first or next investment property.

How investment loans differ from home loans

• Higher rates. Lenders usually charge investors a higher rate than owner-occupiers, and interest-only loans cost more again.
• Rental income is shaded. Most lenders count around 70% to 80% of the expected rent, to allow for vacancies and costs.
• Tighter rules on high debt. APRA's limit on loans with a debt-to-income ratio of six or more, which started on 1 February 2026, affects investors more than other borrowers because investors are more likely to carry multiple loans.

How much deposit do you need?

Most lenders want at least a 10% deposit for an investment property, plus costs. With less than 20%, you will usually pay lenders mortgage insurance. If you already own a home, you may not need cash at all. You can use equity instead.

Using equity to buy an investment property

Equity is the difference between what your home is worth and what you owe. Lenders typically let you borrow up to 80% of your home's value without LMI. So if your home is worth $1,000,000 and you owe $500,000, your usable equity is up to $300,000 ($800,000 minus $500,000).

That equity can fund the deposit and costs on an investment property, with a separate loan for the rest. Structuring it as separate loan splits keeps your investment debt clearly identifiable for tax purposes. Ask your accountant about the right structure.

Interest-only or principal and interest?

Interest-only loans keep repayments lower for a set period, often up to five years, which can help cash flow. But you do not reduce the debt during that time, and repayments jump when the interest-only period ends.

Principal and interest loans cost more each month but build equity and usually come with a lower rate. Many investors choose interest-only on the investment and pay down their own home first, because home loan interest is not tax deductible. Your accountant can tell you what suits your situation.

Negative gearing in plain English

A property is negatively geared when the rent is less than the costs of owning it, including interest, rates, insurance, maintenance and depreciation. The loss can generally be deducted against your other income, which reduces your tax. You are still out of pocket, though. Negative gearing only works as a strategy if the property grows in value over time. This is general information, not tax advice.

Choosing the right investment property

• Strong rental demand and low vacancy rates
• Access to transport, schools, shops and jobs
• Limited new supply nearby
• A property type that suits local tenants, such as townhouses near universities or family homes near schools

Growing a portfolio

Each new property changes how lenders see you. Different lenders treat existing debt, rental income and negative gearing benefits very differently, so the lender that suits your first investment may not suit your third. A broker can map out which lenders to use, in what order, to keep your borrowing capacity open.

Buying an investment property in your super

A self-managed super fund can also borrow to buy property under strict rules. Read our guide to SMSF property loans.

Plan your next property

Run the numbers with our borrowing power calculator, explore investment loans, or book a free call to plan your structure with a Propple broker.

This article is general information only and does not take into account your objectives, financial situation or needs. Government schemes, tax rules and lender policies change, so check current details before acting. Propple Pty Ltd is an Australian Credit Representative (537767) of AFSL 384704.