The property you choose can affect both the loan options available to you and how the lender assesses the overall application.
Your deposit might allow you to consider properties across several suburbs and dwelling types, but lenders do not necessarily treat every property the same way. Factors such as location, property type, valuation, expected rental income and lender policy can influence the maximum LVR available, the amount of rental income recognised for servicing and which lenders are prepared to accept the property as security.
Choosing a property should therefore involve more than looking at the purchase price or expected rental yield. It is also worth understanding how the property may be viewed by lenders and whether the resulting loan structure fits with your broader financial position and future borrowing plans.
How Lenders Assess the Property Before They Assess You
Lenders assess both you and the property when considering an investment loan application. Your income, expenses, existing debts and overall financial position determine whether you can service the proposed lending, while the property itself must meet the lender's security requirements.
For investment properties, lenders generally recognise only a portion of the expected rental income when assessing borrowing capacity. The percentage used varies between lenders and may also depend on the type of rental income being assessed.
Lenders can also apply postcode or property-type restrictions, including lower maximum LVRs for small apartments, specialised properties, high-density developments or locations where they have concerns about marketability or concentration risk.
Consider a buyer with $120,000 available who wants to purchase an investment property while keeping enough borrowing capacity to upgrade their own home later. They are deciding between a one-bedroom apartment near the Brisbane CBD and a three-bedroom house in a suburb 20 kilometres out. The apartment may show a higher rental yield on paper, but lender policy around the property type, postcode and recognised rental income could result in a different borrowing outcome from the house. Understanding these differences before making an offer can help avoid choosing a property that unnecessarily limits your finance options.
Rental Income and Serviceability Under the Current Framework
Rental income is not counted dollar for dollar. Lenders generally assess only a portion of the expected market rent to allow for factors such as vacancies, management expenses and other property costs. The percentage recognised varies between lenders.
APRA-regulated banks currently assess residential mortgage serviceability using a buffer of at least 3 percentage points above the loan interest rate. A property showing $600 per week in rent may therefore contribute less than the full $600 per week towards your borrowing capacity, depending on the lender and how the rental income is assessed.
Since 1 February 2026, APRA-regulated banks have also been subject to limits on high debt-to-income lending. No more than 20% of new investor mortgage lending can be written at a debt-to-income ratio of six times or greater. This is a portfolio-level limit rather than an automatic decline for an individual borrower, but it can affect lender appetite and available options.
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Properties That Support Portfolio Growth and Equity Release
Some properties are bought to hold. Others form part of a longer-term plan to purchase additional property. If your goal is to buy a second investment property within five years, the property you choose today can influence your future lending position. Equity will depend on both changes in the property's value and reductions in the loan balance, and lenders will rely on their own valuation when determining how much equity is available for another purchase or refinance.
Properties with limited comparable sales, unusual characteristics or a very narrow buyer market can sometimes be more difficult for lenders to value. This may result in a more conservative valuation or a smaller range of lenders willing to accept the property as security.
When considering future portfolio growth, look at factors such as marketability, comparable sales, rental demand, ongoing holding costs and whether the property is acceptable to a broad range of lenders. Future capital growth cannot be guaranteed, so the investment decision should not rely on an assumption that one property type will automatically outperform another.
Vacancy Rates and Holding Costs You Can Verify
Vacancy risk is an important cost to consider when purchasing an investment property. A property vacant for six weeks costs you $3,600 in lost rent at $600 per week, while loan repayments and many other holding costs continue during that period.
Before you make an offer, check the vacancy rate for the specific suburb and, where possible, the dwelling type using data from a property portal, research provider or local agency. A suburb vacancy rate does not necessarily mean houses, units and townhouses within that suburb experience the same conditions.
Vacancy rates can also change over time, so consider historical trends alongside current rental listings, local supply, tenant demand and how long comparable properties are taking to lease.
Established Properties and the Negative Gearing Changes From 2027-28
If you purchase an established residential investment property after 7:30pm AEST on 12 May 2026, the treatment of losses on that property changes from the 2027-28 income year.
Losses will generally be able to offset income from other residential properties, including eligible residential capital gains, but will no longer generally be deductible against non-residential income such as salary or wages. Excess losses can be carried forward and used against residential property income in future years.
This does not affect properties held before 7:30pm AEST on 12 May 2026, including properties under contract at that time. Eligible new builds also continue to have access to negative gearing under the new rules.
For many buyers, these changes make the expected cash flow of an established investment property an increasingly important consideration. A property with strong rental income relative to its purchase price, manageable body corporate fees where applicable and sustainable ongoing costs may require a smaller after-tax cash contribution than a property running at a substantial loss.
Independent tax advice should be obtained regarding how the changes apply to your circumstances.
Loan to Value Ratio and Lenders Mortgage Insurance on Different Property Types
Loan-to-value ratio measures the amount being borrowed as a percentage of the lender's assessed property value. Borrowing above 80% LVR will commonly involve Lenders Mortgage Insurance, although whether LMI applies and the amount charged will depend on the lender, loan amount, LVR and insurer.
Property type can also affect the maximum LVR a lender is prepared to accept. Some lenders apply lower LVR limits or additional restrictions to properties such as very small apartments, serviced apartments, high-density developments or specialised accommodation.
If you are borrowing above 80%, the property type can therefore affect the range of lenders available to you. A property accepted at 90% LVR by one lender may be restricted to a lower LVR by another.
Selecting a property that is acceptable to a broader range of lenders can provide greater flexibility when comparing rates, loan features and future refinancing options.
Location Details That Change the Loan Structure
Brisbane investors often compare properties across different suburbs and growth corridors north and south of the river.
Location can affect the lending options available, particularly where lenders apply postcode, development or property-type restrictions. For example, lender treatment of a standard residential house in a suburb such as Everton Park may differ from the treatment of an apartment within a large high-density development elsewhere in Brisbane.
Lenders may also apply additional requirements in locations where they already have significant exposure, where there are large volumes of similar properties or where comparable sales are limited.
These policies vary between lenders and can change over time. Rather than assuming a particular suburb or property type will automatically receive more favourable treatment, confirm that the property fits within the lender's acceptable security policy before making an unconditional commitment.
New Builds, Depreciation and the Loan Features You Actually Use
Eligible new builds continue to allow investors to access negative gearing against other assessable income under the changes commencing from the 2027-28 income year.
Newer properties may also provide access to depreciation or capital works deductions depending on the property, construction costs, assets included and the investor's individual circumstances. The amount available can vary significantly, so investors should obtain appropriate tax advice or a depreciation schedule rather than relying on a general estimate.
From a lending perspective, new builds are still subject to lender valuation and security requirements. Some developments, particularly large apartment projects or off-the-plan purchases, may be subject to additional restrictions depending on the lender, location and concentration of similar properties.
When structuring the loan, select features that suit how you intend to manage the investment. An offset account linked to a variable rate portion can allow you to hold surplus cash while reducing the interest charged and retaining access to those funds. Interest-only repayments for a fixed period can reduce required repayments during that period, but the principal balance does not reduce and repayments will generally increase once the loan converts to principal and interest.
Stamp Duty, Body Corporate and Claimable Expenses That Affect Your Return
Stamp duty is an upfront acquisition cost and is not generally deductible against rental income. It may instead form part of the property's CGT cost base.
Under current Queensland transfer duty rates, standard transfer duty on a $600,000 investment property is approximately $20,025. On a $700,000 investment property, it is approximately $24,525. These figures assume no concession or exemption applies.
The difference affects how much cash you need at settlement and how much you may need to retain for other upfront and ongoing costs.
Body corporate fees on units and townhouses also need to be considered. Regular administration fund payments and general-purpose sinking fund contributions relating to ongoing administration and maintenance may generally be deductible. However, special levies used to fund capital improvements are not necessarily immediately deductible and may instead be eligible for capital works deductions over time.
Body corporate fees also reduce the property's cash flow. If you are comparing a unit and a house at similar prices, factor in body corporate fees, insurance and sinking fund contributions, and check the body corporate records for upcoming special levies or major works that may require additional contributions.
Council rates, landlord insurance, property management fees, repairs and maintenance, and eligible loan interest may also be deductible depending on the nature of the expense and how the property is used.
Loan establishment fees and certain other borrowing expenses are not necessarily deductible in full in the year they are incurred. Where total eligible borrowing expenses exceed $100, the deduction is generally spread over five years or the term of the loan, whichever is shorter.
A quantity surveyor may also be able to prepare a depreciation schedule where appropriate, and the cost of obtaining tax advice or a depreciation schedule may itself have tax implications. Keep records of property-related expenses from settlement onward and confirm the available deductions with your accountant or tax adviser.
Ready to Review Your Investment Loan Options?
Whether you're preparing to purchase your first investment property, expanding an existing portfolio or comparing different property and loan structures, Wealthcove can assess your borrowing capacity and compare investment loan options across banks and specialist lenders based on your circumstances.
If you already have an investment or residential loan and want to review whether it is still competitive, our loan health check can help you compare your existing lending with current options. If you're based locally, you can also speak with our South Brisbane mortgage broker.
Book an appointment with Liam Pahl, Finance & Mortgage Broker at Wealthcove or call Liam directly on 0452 646 192 to discuss your investment property finance options.
Sources & References
Australian Treasury – Budget 2026-27 tax system changes, including the negative gearing changes applying from 1 July 2027.
Australian Prudential Regulation Authority – Mortgage serviceability buffer and current high debt-to-income lending limits.
Queensland Revenue Office – Current Queensland transfer duty rates for investment property purchases.
Australian Taxation Office – Rental property expenses, body corporate fees and special levies.
Australian Taxation Office – Borrowing expenses, including loan establishment fees and the rule requiring eligible borrowing costs above $100 to generally be deducted over five years or the loan term if shorter.
