Buying an investment unit is often the most accessible entry point for couples looking to build wealth through property. Units typically require a smaller deposit than houses, and the rental demand in apartment buildings near employment hubs and transport can deliver reliable passive income.
The path to approval looks different for investment property finance compared to an owner-occupied loan. Lenders assess the property itself more carefully, apply different serviceability tests, and price the loan differently depending on whether you choose interest-only or principal and interest repayments.
What Deposit Do You Need for an Investment Unit?
Most lenders require a 10% deposit plus costs for an investment property loan, though you can borrow with as little as 5% if you pay Lenders Mortgage Insurance. A 20% deposit allows you to avoid LMI entirely and access better investor interest rates.
Consider a couple purchasing a two-bedroom unit at the current median in a Brisbane suburb. With a 20% deposit, they avoid LMI and secure a lower interest rate, which improves cash flow from day one. With a 10% deposit, they pay LMI upfront or capitalise it into the loan amount, which increases the loan size and ongoing repayments. Both approaches can work depending on whether you want to preserve cash for renovations or additional purchases, or reduce your loan to value ratio from the start.
If you are using equity from your own home rather than cash savings, the same LVR thresholds apply. Releasing equity to fund the deposit on an investment property is a common strategy for couples who have built up value in their principal place of residence. The equity release needs to keep your total borrowing on the owner-occupied property within the lender's limits, and the combined serviceability across both loans must still stack up. You can read more about borrowing capacity and how lenders calculate what you can afford across multiple properties.
How Lenders Assess Rental Income
Lenders use rental income to offset the cost of your investment loan when calculating serviceability, but they do not credit the full amount. Most lenders apply a shading factor of around 80%, meaning if the unit generates $500 per week in rent, they will only use $400 in their assessment.
They also apply a vacancy rate to account for periods when the property may sit empty between tenants. This is typically 4 to 6 weeks per year, depending on the lender and location. If you are buying in an area with strong rental demand and low vacancy, it will not change the lender's assessment, but it does mean your actual cash flow can be better than what the serviceability calculation reflects.
For a unit with $26,000 in annual rent, the lender might only credit around $19,000 after shading and vacancy adjustments. That income is then used to reduce the net cost of holding the investment property when they assess whether you can afford both your existing home loan and the new investment loan.
Interest-Only or Principal and Interest?
An interest-only investment loan keeps your repayments lower during the interest-only period, which can improve cash flow and allow you to direct surplus income toward other investments or offset accounts. Most lenders offer interest-only periods of up to five years on investment loans, after which the loan reverts to principal and interest unless you apply to extend.
Principal and interest repayments reduce the loan balance over time, which builds equity and lowers risk if property values fall. It also means you are paying down debt rather than holding it indefinitely. The choice depends on your property investment strategy and whether you prioritise tax efficiency, cash flow, or long-term debt reduction.
In our experience, couples buying their first investment unit often lean toward interest-only in the early years to keep repayments manageable while they adjust to holding two properties. Once their income increases or they refinance, they switch to principal and interest to start reducing the loan amount.
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Body Corporate Fees and Borrowing Capacity
Body corporate fees are a recurring cost specific to unit ownership, and lenders include them when assessing your ability to service the loan. If the body corporate levies are high relative to the rental income, it reduces the net benefit of that income in the serviceability calculation.
A unit with $400 per week in rent and $150 per week in body corporate fees leaves $250 per week before you factor in loan repayments, council rates, insurance, and maintenance. Lenders see that net figure, not the headline rent. If the body corporate fees are unusually high due to building upgrades or sinking fund contributions, it can affect how much you can borrow or whether the deal stacks up at all.
Before making an offer, request a copy of the body corporate budget and levy notice to confirm the fees are sustainable and not forecast to increase sharply in the next 12 months. This is particularly relevant for older buildings or complexes with shared facilities like pools and gyms.
Variable Rate or Fixed Rate for Investment Loans?
Variable rate investment loans give you flexibility to make extra repayments, redraw funds, and refinance without break costs. Fixed rate options lock in your repayments for a set period, usually one to five years, which can provide certainty if you expect interest rates to rise.
Most lenders allow you to split your investment loan between variable and fixed, which gives you some rate protection while retaining flexibility on part of the balance. A 50/50 split is common, though you can choose any proportion that suits your tolerance for rate movements and your plans for the property.
Fixed rate investment loans typically attract a higher interest rate than owner-occupied fixed loans, and you lose access to offset accounts on the fixed portion. If you break a fixed rate early to sell or refinance, you may face break costs that can run into thousands of dollars depending on how much rates have moved since you locked in.
What Investment Loan Features Matter Most?
An offset account linked to your investment loan allows you to park surplus cash and reduce the interest charged without making extra repayments. This is particularly useful if you want to keep your loan balance high to maximise tax deductions while still reducing the actual interest cost.
Redraw facilities let you access extra repayments you have made, but tax rules can complicate this if you redraw funds for non-investment purposes. An offset avoids that issue because the loan balance never changes, so all interest remains claimable.
Some lenders offer investment loan products with free valuation, no application fees, or discounted annual fees for the first year. While these investment loan features reduce upfront costs, they matter less than the ongoing interest rate and whether the loan structure aligns with your long-term plans. Compare investment loan options from multiple lenders rather than defaulting to your existing bank, as investor interest rates and policies vary widely.
Negative Gearing Benefits After Recent Tax Changes
Negative gearing allows you to claim the net loss from your investment property as a tax deduction against your other income, including salary and wages. If your unit costs more to hold than it earns in rent, that loss reduces your taxable income and lowers the tax you pay each year.
Under recent Federal Budget changes, properties purchased after 12 May 2026 will face new rules from 1 July 2027. For established units bought after that date, rental losses will only be deductible against rental income or capital gains from residential property, not against wages. Losses can still be carried forward, but the immediate tax benefit is reduced. If you bought your investment unit before 13 May 2026, the existing negative gearing arrangements continue to apply.
For couples considering their first investment property, the timing of your purchase and the type of property you choose now carry tax implications that extend well beyond settlement. New builds remain exempt from the new negative gearing limits, which makes them relatively more attractive under the revised rules. Speak to a tax adviser or accountant to understand how the changes affect your specific situation and whether the numbers still support your decision to buy.
How Rate Discounts Work for Property Investors
Investment loan interest rates are typically higher than owner-occupied rates, but the margin varies depending on your deposit, loan size, and lender. A rate discount of 0.50% to 1.00% below the lender's standard variable investment rate is common for borrowers with a 20% deposit and a loan above $500,000.
Some lenders offer better investor interest rates for interest-only loans, while others price principal and interest more competitively. The difference can be 0.10% to 0.20%, which adds up over the life of the loan. If you are comparing investment loan products, look at the comparison rate as well as the advertised rate, as it includes most fees and gives a clearer picture of the total cost.
You can also access rate discounts by bundling your investment loan with an owner-occupied loan, holding a package account, or refinancing with a new lender. If your current loan is more than 12 months old and you have not reviewed it recently, a loan health check can identify whether you are paying more than you need to.
Stamp Duty and Settlement Costs for Investment Units
Stamp duty on investment property in Queensland is calculated at the standard rates with no concessions for investors, regardless of whether you are a first-time buyer. For a unit purchased in the low to mid price range typical of entry-level investment properties, stamp duty can range from $8,000 to $15,000 depending on the purchase price.
You also need to budget for settlement costs including conveyancing, building and pest inspections, loan application fees, and bank valuation. These costs usually add another $3,000 to $5,000 to the upfront expense. If you are borrowing at 90% LVR and paying LMI, that premium can add several thousand more, though it is often capitalised into the loan rather than paid in cash.
All of these settlement costs are claimable expenses for tax purposes, either immediately or depreciated over several years depending on the item. Keep receipts and provide them to your accountant at tax time to maximise tax deductions in the year you purchase.
What Happens When You Want to Grow Your Portfolio?
Once you have held your first investment unit for a year or two and built some equity, you may consider purchasing a second property. Lenders assess portfolio growth differently depending on how many investment properties you already hold and how much equity you have across all properties.
If your first unit has increased in value and you have paid down some of the loan, you can leverage that equity to fund the deposit on your next purchase. The same LVR limits apply to the new property, and the combined serviceability test becomes more complex as lenders need to account for rental income, expenses, and debt across multiple properties.
Some lenders cap the number of investment properties they will fund, or they apply stricter serviceability overlays once you reach three or four properties. If you are planning to build a portfolio rather than holding a single investment, it is worth discussing your long-term strategy with a mortgage broker who can identify which lenders support portfolio growth and structure your loans accordingly.
Buying an investment unit is a practical way for couples to enter the property market and start building wealth without needing the capital required for a house. The lending process involves more scrutiny and higher rates than an owner-occupied loan, but with the right structure and a clear understanding of how rental income, tax deductions, and equity work together, it is entirely achievable.
Call one of our team or book an appointment at a time that works for you to access investment loan options from banks and lenders across Australia and find a structure that fits your plans.
Frequently Asked Questions
What deposit do I need to buy an investment unit?
Most lenders require a 10% deposit plus costs for an investment property, though you can borrow with as little as 5% if you pay Lenders Mortgage Insurance. A 20% deposit allows you to avoid LMI and access lower interest rates.
How do lenders assess rental income on an investment unit?
Lenders typically apply an 80% shading factor to rental income and deduct a vacancy allowance of 4 to 6 weeks per year. This means if the unit earns $500 per week, they may only credit around $400 in their serviceability assessment.
Should I choose interest-only or principal and interest for an investment loan?
Interest-only repayments keep costs lower and improve cash flow, which can be useful in the early years. Principal and interest repayments reduce your loan balance over time and build equity, which lowers risk if property values fall.
How do body corporate fees affect my borrowing capacity?
Lenders include body corporate fees when calculating your ability to service the loan. High levies reduce the net rental income in their assessment, which can lower how much you can borrow or affect whether the property stacks up financially.
Do negative gearing rules still apply if I buy an investment unit now?
If you purchased your investment unit before 13 May 2026, existing negative gearing rules apply and you can claim rental losses against all income. Properties bought after that date will face new limits from 1 July 2027, where losses are only deductible against rental or property capital gains.
