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First-Time Investment Loan Guide: Your Ultimate Starting Point

First-Time Investment Loan Guide: Your Ultimate Starting Point

Investing in property can help you achieve your financial and lifestyle goals. For many first-time investors, it can seem overwhelming to know where to begin.

We are committed to ongoing education and advice for those new and currently on their journey to property wealth and we’ve put together this comprehensive guide to get you started with your property investment journey.

Why invest in property?

 Building a property portfolio can help you unlock financial stability, freedom and ultimately can be used as a strong vehicle to the lifestyle you're looking for.

However, there are a few essential things to consider before investing.

Property investment typically involves buying a property to earn a return, usually through rental income or capital gains from the future property sale.

Most investment properties fall into three main categories:

  • Residential homes
  • Commercial properties, such as retail stores, offices or warehouses.
  • Mixed-use properties can often be used for both commercial and residential purposes.

 If the investment property is for residential, commercial, or mixed-use, investors will typically engage a real estate agency or property management company to administer the lease.

Other ways to invest in the property include:

  • Holiday homes
  • Rural properties may consist of one or more businesses using the property for farming, tourism or other purposes.
  • Development sites may be vacant land suitable for subdivision or existing properties ideal for redevelopment.


What are the benefits and considerations of property investment?


  • Income: Many consider the primary benefit of investing in property to be the rental income earned if the property is tenanted.
  • Capital growth: If a property increases in value, investors benefit from a capital gain when the property is sold.
  • Tax benefits: Depending on your circumstances and the property, there may be tax benefits to purchasing an investment property.
  • Easily managed: Managing an investment property is relatively straightforward compared to other complex investments, which often require highly specialised knowledge and skills.


  • Vacancy: Depending on market conditions or the property itself, there may be times when the rental property is vacant, leaving the owner to make mortgage repayments without income.
  • Reduction in value: Property values may sometimes decrease, which is a normal part of the property cycle. Australian housing prices have risen but don't increase at the same rate each year. Over the last few years, a period of increasing values has been followed by a property market that has seen prices stagnate or fall.
  • Cost: The owner may have to cover the shortfall if rental income does not exceed mortgage repayments and other expenses.
  • High barrier to entry: Besides the property's cost, expenses like legal fees, stamp duty and real estate agent's fees can make the entry barrier high.


Understanding your financial situation and goals

Considering your current and future financial situation, and property wealth goals, is essential when investing.

How much could I borrow?

When buying an investment property, several factors decide how much you can borrow.

Using a professional with in-depth experience across debt structure strategies, investment property lending will strengthen your position and allow you to start in the strongest position based on your needs.  Things a Mortgage Advisor will consider when assessing your borrowing capability include:

  • Your income
  • Any existing home loan repayments
  • Other living expenses (e.g. groceries, schools fees)
  • Any other debts (e.g. personal loans, credit cards)

When purchasing an investment property, the lender will also consider the proposed rental income and approximate costs to manage that property.

Homeowners with equity in their existing property may be able to refinance their home loan to use that equity towards purchasing an investment property.

When buying property for the first time, the lender will consider your deposit size.


How much deposit do I need to buy an investment property?

Usually, our advice is that you will need at least 20% of the purchase price. However, you can purchase an investment property with less than 20% with Lenders Mortgage Insurance (LMI).

This is a one-off fee added to the loan amount and protects the lender if you can't meet their mortgage repayments.

If you own a home, you could use part or all of your available equity to contribute towards a deposit for the investment property.

However, you should be aware that accessing equity means increasing the amount of money owed against that property (the principal), so it's vital to ensure you can meet the higher loan repayments before doing so.


What are the upfront costs of investing in property?

There are several upfront costs, so it's vital to understand these costs before deciding to invest.

Stamp duty

Most buyers pay stamp duty when purchasing an investment property. Check out our

guide on Stamp Duty[1]  to learn more.

Legal and conveyancing fees

A lawyer or conveyancer can review the contract, perform property title checks, draft documents for settlement and facilitate the payment. Fees generally cost between $1,000 and $3,000.

Lender fees

If you take out a home loan, you may need to pay establishment and application fees. Typically cost between $200 and $800, but many lenders waive these fees.

Pest and building reports

When buying any property, having a pest and building report is highly recommended. You can expect this to cost generally between $200 and $600.

Property Investing: Ongoing Costs

Council rates

Property owners are usually responsible for paying council and water rates.

Lender fees

Some lenders charge extra for an offset account or redraw fee; you may be liable for these.
Landlord insurance

Typically covers rental costs, rebuilding costs, and landlord contents cover after an insured event, such as a natural disaster.

Strata or body corporate fees

If the investment property is an apartment or commercial strata property, you are likely to pay strata fees. These fees cover building insurance and the maintenance and repair of common areas.

Property management fees

You can expect property management fees to range from 5% to 15% of all rental income. These fees usually cover marketing, administration, property condition report, inspections and lease transfers.

Repairs and maintenance costs

You will likely have to pay for repairs and maintenance even with new properties. These may include emergency repairs, plumbing and electrical work, or general maintenance.

Positive and negative gearing - what's the difference?

Positive gearing is when the income from an asset is more than the costs. In other words, investors have a passive income.

Sometimes investors adopt positive gearing to build their wealth while increasing debt in the short term.

With negative gearing, investors are not dependent on rental income for profit, ensuring that rents remain competitive. 

Negative gearing is a great way for many investors to limit their losses until they sell the property.

Essentially, negative gearing works if an investor's money from a property's capital growth is larger than the loss they make from the rent.

You can learn more about negative gearing in our guide.


How to apply for an investment home loan


If you plan on taking out an investment home loan, there are a few extra things to know compared to a residential mortgage. 


Principal and interest vs interest-only

Like owner-occupier home loans, you can take out a principal and interest (P&I) investment loan or an interest-only (I/O) loan.

P&I loan requires you to make regular repayments on the amount borrowed (principal), plus interest.

You will pay off this loan over an agreed period, usually 25 or 30 years. 

You should consider the benefits and disadvantages of a P&I investment loan.


  • Pay less interest over the loan's life, as the interest rate is calculated against the principal loan amount, which decreases over time.
  • Lower interest rate compared to interest-only home loan rates.
  • Pay off your loan faster, so you can own your investment property sooner.


  • Repayments are typically higher than interest-only loan repayments as you pay off the principal.
  • Borrowers can usually only claim the interest portion of the repayments as a tax deduction. 

Interest-only (I/O) home loans require you only to make interest and fee repayments for a defined period.

There is no reduction of the principal during this time.
At the end of the I/O period, the loan typically reverts to a standard P&I repayment until the loan is repaid in full.

There are potential benefits and disadvantages of an I/O investment loan.


  • Investors may claim tax deductions for the interest or a portion of the interest charged on the loan.
  • Repayments may be lower for the interest-only period.


  • The principal will not reduce during the I/O period
  • I/O loans have a higher interest rate
  • Repayments may increase once the I/O period ends.
  • It may take longer to pay off the loan and own the investment property outright.

How do I apply for an investment home loan? 

You can apply for an investment home loan with our award-winning Mortgage Advice team r, over the phone or in person by calling 1300 001 215. 

To help you get started, we share seven proven tips for your next home loan application in this article.

If you’re serious about generating long-term wealth, value strategic advice, structure and the execution on how to get you there - contact our expert property advice, acquisition and mortgage strategy team today on 1300 001 215.