How to Finance an Investment Property: 2026 Guide

Last Updated: October 16, 2026

Buying an investment property can be an important part of building wealth, but securing a loan is only one part of the decision. You also need to understand the deposit, purchase costs, ongoing cash flow, tax implications and how the property fits into your broader financial plans.

The right approach starts with understanding what you can comfortably afford, rather than simply borrowing the maximum amount a lender is prepared to offer.

Veyron Wealth Group helps clients assess investment property decisions in the context of their overall financial position, investment strategy and long-term goals. While Veyron does not arrange home loans or act as a mortgage broker, we can refer clients to a mortgage broker or lender to discuss suitable finance options.

This guide explains the key considerations when financing an Australian investment property in 2026.

1. Understand Your Investment Property Borrowing Capacity

Borrowing capacity is the amount a lender may be willing to lend based on your income, expenses, debts and other financial commitments. It helps determine the price range you can consider when looking for an investment property.

However, your borrowing capacity is not necessarily the same as the amount you should borrow. A loan that meets a lender’s assessment criteria may still leave you with an uncomfortable cash-flow position.

How lenders assess borrowing capacity

Each lender has its own lending policies, but assessments commonly consider:

• Income: Salary, business income, bonuses and other earnings, subject to the lender’s verification and assessment rules.
• Rental income: Expected rent may be included, but lenders commonly assess only a proportion of it to allow for vacancies and property expenses.
• Existing debts: Home loans, personal loans, car finance, credit cards and other liabilities can reduce your borrowing capacity.
• Living expenses: Lenders consider your household expenditure and may compare declared expenses with their own benchmarks.
• Interest-rate buffers: Your ability to service the loan is generally tested at an assessment rate above the actual interest rate.
• Loan structure and ownership: Borrowing through an individual, company, trust or self-managed super fund (SMSF) can affect the assessment and requirements.

Credit card limits can affect borrowing capacity even when the cards are paid off. Similarly, existing mortgage commitments can significantly restrict how much additional debt a household can support.

Why the lender’s maximum may be too high

Borrowing to your limit can leave little room for unexpected expenses, a rise in interest rates, repairs or a period without a tenant.

Before proceeding, prepare your own budget based on realistic household spending and the property’s likely cash-flow requirements. Consider whether you could continue meeting repayments if your income fell temporarily or the property generated less rent than expected.

A mortgage broker or lender can help you understand your potential borrowing capacity and the finance options available to you. Veyron can help you assess whether the proposed purchase is consistent with your wider financial objectives.

2. Calculate Your Deposit and Loan-to-Value Ratio

Your deposit is the amount you contribute towards the purchase price, with the balance generally funded by a loan.

The loan-to-value ratio (LVR) compares the loan amount with the property’s value. For example, if a property is valued at $700,000 and the loan is $560,000, the LVR is 80%.

An 80% LVR generally means you have contributed 20% of the property’s value towards the purchase price, excluding transaction costs.

How much deposit do you need?

Some lenders may offer investment property loans with deposits below 20%, subject to their lending criteria. However, a smaller deposit may mean you need to pay lenders mortgage insurance (LMI), accept different lending terms or meet additional requirements.

LMI generally protects the lender against loss if the borrower defaults. It does not protect you from being unable to meet repayments.

A larger deposit can reduce your loan balance, repayments and exposure to interest-rate changes. However, using all your available savings to fund the deposit may leave you without enough cash to cover unexpected costs.

Your deposit might come from:

• Personal savings.
• Proceeds from selling another asset.
• A gift, where accepted by the lender.
• Available equity in another property, subject to lending approval.

Whatever the source, allow for purchase costs in addition to the deposit. You should also retain an appropriate cash reserve for vacancies, repairs and other financial commitments.

3. Consider Using Equity in Your Home

If you own your home, you may have equity that could help fund an investment property purchase.

Equity is broadly the difference between your property’s value and the debt secured against it. However, not all equity is necessarily available to borrow. A lender will consider its valuation, the existing loan, your income and your ability to service additional debt.

Using home equity may reduce the need to accumulate a separate cash deposit, but it does not eliminate the cost or risk of borrowing.

For example, borrowing against your home to purchase an investment property increases your total debt and may put your home at greater financial risk if you cannot meet your repayments.

Keep the purpose of each loan clear

Where funds are borrowed for different purposes, loan structure and record-keeping are important. A separate loan split may help maintain a clear record of how borrowed funds are used.

The tax treatment of interest generally depends on the use of the borrowed money, rather than simply the property securing the loan. Mixing private and investment borrowing can make the tax position more complicated.

Before using equity, consider the impact on your home loan, household cash flow, future borrowing capacity and financial flexibility. Obtain advice from a registered tax agent about the tax implications of your proposed borrowing arrangements.

4. Budget for Upfront and Ongoing Costs

The purchase price is only one part of the cost of acquiring an investment property. Transaction expenses and ongoing ownership costs can make a substantial difference to the amount of money you need.

Upfront purchase costs

Depending on the property and location, you may need to budget for:

• Stamp duty or transfer duty.
• Solicitor or conveyancer fees.
• Building and pest inspections.
• Loan application and valuation fees, where applicable.
• Lenders mortgage insurance, if applicable.
• Initial repairs or improvements.
• Adjustments for council rates, water charges and strata expenses at settlement.

Stamp duty varies by state or territory and depends on factors such as the purchase price and the type of transaction. Investment property buyers should not assume that concessions available to eligible owner-occupiers will apply to them.

For an illustrative purchase of a $700,000 property, a 20% deposit would be $140,000, leaving a proposed loan of $560,000. Stamp duty and other purchase costs would be additional.

The actual amount required will depend on the state or territory, the property and the transaction. Check the relevant revenue office’s current calculator and confirm the expected costs with your conveyancer before committing.

Ongoing ownership costs

Once the property is purchased, allow for:

• Loan repayments and interest.
• Council rates and water charges.
• Landlord insurance.
• Property management fees and letting costs.
• Repairs and general maintenance.
• Strata or body corporate levies, where applicable.
• Land tax, where applicable.
• Periods without rental income.

Some costs will be relatively predictable, while others can be substantial and irregular. Older properties, for example, may require significant maintenance or replacement of major items.

A realistic budget should account for both routine expenses and unexpected costs.

5. Calculate the Property’s Cash Flow

Rental income does not necessarily cover all the costs of owning an investment property.

A property may generate positive cash flow, where income exceeds expenses, or negative cash flow, where you need to contribute money from your salary, business income or other resources.

To estimate the likely position, start with expected annual rent and subtract the costs of ownership, including property management, rates, insurance, maintenance and loan repayments.

For example, a property renting for $650 per week would generate $33,800 in gross rent over 52 weeks if it remained occupied throughout the year. Actual income could be lower due to vacancies, changes in rent or other circumstances.

From that amount, you would need to deduct relevant expenses and loan repayments. The remaining figure indicates whether the property is expected to contribute to your finances or require additional funding.

Allow for interest-rate rises and vacancies

Do not base your decision solely on today’s interest rate or an assumption that the property will always be occupied.

Test your budget against several scenarios:

• Interest rates increase and repayments rise.
• The property is vacant for several weeks.
• A major repair is required.
• Rental income is lower than expected.
• Your personal income temporarily decreases.

Ask yourself whether you could meet the shortfall without relying on credit cards or selling investments at an inconvenient time.

Understand negative gearing

A property is commonly described as negatively geared when its deductible expenses exceed its rental income for tax purposes. Subject to the applicable rules, a rental loss may reduce taxable income from other sources.

However, negative gearing does not make a property affordable by itself. Any tax benefit will generally cover only part of an eligible loss, and the timing and value of that benefit depend on your circumstances.

You still need sufficient cash to meet the actual expenses and loan repayments. A registered tax agent can explain the tax treatment of rental income, interest and other property expenses.

6. Compare Interest-Only and Principal-and-Interest Loans

Investment property loans may offer different repayment structures. Two common options are interest-only and principal-and-interest.

Interest-only repayments cover the interest charged during an agreed period, without reducing the principal through scheduled repayments. This can reduce repayments during the interest-only term, but the outstanding loan balance generally does not decrease through those repayments.

When the interest-only period ends, repayments may increase if the loan switches to principal-and-interest. The remaining principal must then be repaid over the remaining loan term, subject to the loan arrangements.

Principal-and-interest repayments cover both interest and a portion of the loan principal. This reduces the outstanding debt over time, assuming repayments are made as required.

Neither structure is automatically better for every investor. The decision depends on cash flow, other debts, tax considerations, investment time frame and your ability to manage future repayments.

An offset account may also be available with some loans. Eligible money held in the account can reduce the balance on which interest is calculated, depending on the loan’s terms.

Discuss the features, costs and risks of available loans with a mortgage broker or lender. Consider how the repayment structure fits into your overall financial strategy rather than choosing solely on the basis of the initial repayment amount.

7. Understand the Finance Application Process

Once you have established a realistic budget and identified a potential property, you can investigate finance options.

A typical process involves the following steps:

1. Review your finances. Gather details of income, expenses, debts, savings and existing assets.
2. Discuss borrowing capacity. Speak with a mortgage broker or lender about potential loan amounts and eligibility.
3. Consider pre-approval. A lender may provide conditional pre-approval, subject to its requirements and any subsequent assessment.
4. Research and select a property. Consider the location, purchase price, rental prospects, likely expenses and suitability for your investment goals.
5. Obtain appropriate inspections and legal advice. Understand the property’s condition, contract terms and any relevant restrictions.
6. Submit the full loan application. The lender will assess your financial position and the proposed security property.
7. Receive formal approval and prepare for settlement. Confirm the finance conditions, loan documents and settlement arrangements with the relevant professionals.

Pre-approval is not a guarantee that a loan will be approved. It may be subject to conditions, can expire and may need to be reassessed if your circumstances change. The lender will generally also assess the property and its valuation.

If the valuation is lower than the agreed purchase price, you may need to contribute additional funds or reconsider the transaction.

Allow enough time for finance approval and make sure you understand the conditions in your purchase contract. Your solicitor or conveyancer can explain the contractual implications and any relevant finance clauses.

8. Consider How the Property Fits Your Financial Plan

Financing an investment property should not be considered in isolation. Property is one investment option among many, and a substantial purchase can affect your liquidity, debt levels, retirement plans and ability to invest elsewhere.

Before proceeding, consider the following questions:

• Will the purchase leave enough cash available for emergencies?
• Can you meet repayments if interest rates rise or rental income falls?
• How much of your overall wealth will be tied up in property?
• Will the investment affect your ability to make superannuation contributions or pursue other goals?
• How does the proposed property fit with your existing investments?
• What would happen if you needed to sell earlier than planned?

Property can provide rental income and potential long-term capital growth, but neither is guaranteed. Property values can fall, selling can take time, and transaction costs can be significant. A property also creates exposure to a particular location and asset type, rather than providing the diversification available through some other investments.

The ownership structure also deserves careful consideration. Buying personally, jointly, through a trust or through an SMSF can have different legal, tax, financing and administrative consequences. SMSF borrowing is subject to specific rules, including restrictions on the structure of the borrowing arrangement and the fund’s obligations. Specialist advice should be obtained before considering property through an SMSF.

Veyron can help you evaluate the proposed purchase as part of your wider financial position, including its relationship with your investment strategy, cash flow and long-term objectives. We do not arrange property finance, but can refer you to a mortgage broker or lender to discuss lending options.

Conclusion: Plan Before You Borrow

Financing an investment property involves more than obtaining loan approval. You need to understand your deposit, transaction costs, ongoing expenses, repayment commitments and the financial risks of owning property.

The most useful starting point is a realistic assessment of what you can comfortably afford, including how the investment would perform under less favourable conditions. Borrowing to the maximum amount available may limit your flexibility and put pressure on your household finances.

Veyron Wealth Group helps clients assess investment decisions in the context of their broader financial goals. If you are considering buying an investment property, we can help you explore how it may fit into your financial plan and refer you to a mortgage broker or lender to discuss finance options.

Visit our investment advice page or book a consultation to discuss your financial goals.

Boring money, exciting life.

The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. It is not personal financial, credit or tax advice. Property values and rental income can fall, and borrowing to invest involves risk. Consider obtaining advice from an appropriately qualified financial adviser, mortgage broker or lender, solicitor or conveyancer, and registered tax agent before making a decision.

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Frequently Asked Questions

How much deposit do you need for an investment property?

A 20% deposit is a common benchmark because it may help you avoid lenders mortgage insurance, depending on the lender and transaction. Some lenders may consider smaller deposits, subject to their criteria and additional costs. You should also allow for stamp duty, legal fees, inspections and a cash reserve for vacancies and repairs.

Can rental income help you qualify for an investment property loan?

Yes. Lenders commonly consider expected rental income when assessing borrowing capacity, but may count only a portion of it. The amount accepted depends on the lender’s policies and the circumstances of the property and applicant.

Can I use equity in my home to buy an investment property?

Potentially. A lender may allow you to borrow against available equity if you meet its valuation, serviceability and other requirements. This increases your debt and may put your home at greater risk if you cannot meet repayments. Obtain financial and tax advice before proceeding.

Should I choose an interest-only or principal-and-interest loan?

It depends on your cash flow, investment objectives, tax position and ability to manage future repayments. Interest-only repayments may initially be lower but do not ordinarily reduce the principal, and repayments may rise when the interest-only period ends. Discuss the options with a mortgage broker or lender.

Can Veyron arrange finance for an investment property?

No. Veyron Wealth Group does not act as a mortgage broker or arrange property finance. We can help you consider how an investment property fits into your broader financial plan and refer you to a mortgage broker or lender to discuss lending options.

Is an investment property always negatively geared?

No. A property may be positively geared if its rental income exceeds relevant expenses, or negatively geared if deductible expenses exceed rental income for tax purposes. Actual cash flow also depends on repayments, vacancies, maintenance and other costs. A registered tax agent can explain how the tax rules apply to your circumstances.