Investment Property Loans: What You Need to Know

Investing in property can build long-term wealth, but investment property loans work differently from standard home loans.

How Investment Loans Differ

Lenders view investment properties as higher risk:

• Higher interest rates (0.2-0.5% above owner-occupied)
• Larger deposit requirements (usually 20% minimum)
• Stricter serviceability assessments
• Rental income considered (often only 80%)
• Different tax treatment

Loan Structures

Principal and Interest: Builds equity faster, higher repayments Interest-Only: Lower repayments, improves cash flow, does not reduce debt Line of Credit: Flexible borrowing against equity

Tax Considerations

Negative Gearing: Offset losses against taxable income Depreciation: Claim as tax deductions Deductible Expenses: Interest, fees, repairs, insurance, rates Capital Gains Tax: 50% discount if held 12+ months

Building Your Portfolio

Strategy 1: Buy and Hold - Growth areas, long-term appreciation Strategy 2: Positive Cash Flow - Rent exceeds expenses Strategy 3: Rentvesting - Rent where you want to live, invest where you can afford

Common Mistakes

Overleveraging

Buying in low-growth areas for yield only

Neglecting research

Underestimating ongoing costs

Inadequate cash reserves

Consult with tax professional and mortgage broker before proceeding.