Investment Property Types: What You Need to Know

As a midwife, your dedication to supporting families through significant life moments is invaluable. While you focus on caring for others, building your own financial security through property investment can provide the passive income and financial freedom you deserve. Understanding the various investment property types available can help you make informed decisions about your property investment strategy.

Residential Investment Properties

Residential properties remain the most popular choice for those buying your first investment property. These properties generate rental income while potentially appreciating in value over time, helping you build wealth through property ownership.

Houses

Standalone houses appeal to families and offer several investment loan benefits. They typically provide:

• Longer tenant retention periods
• Greater capital growth potential in established suburbs
• Land value appreciation over time
• Flexibility for future renovations or development

When considering an investment loan amount for a house, factor in ongoing maintenance costs and yard upkeep. However, these properties often command higher rental income compared to apartments.

Units and Apartments

Units and apartments generally require a lower investor deposit and less maintenance responsibility. Key considerations include:

• Body corporate fees that impact your overall returns
• Lower entry costs for new property investors
• Higher vacancy rates in oversupplied markets
• Rental appeal to young professionals and downsizers

Lenders may apply different loan to value ratio (LVR) requirements for apartments, particularly in high-density areas. Some lenders restrict investor borrowing for properties above certain floors or in buildings with specific characteristics.

Townhouses

Townhouses offer a middle ground between houses and apartments. These properties attract diverse tenant demographics including small families and professionals. Investment loan products for townhouses typically feature competitive investor interest rates, as lenders view them favourably.

The combination of lower maintenance than houses and more space than apartments makes townhouses attractive for portfolio growth. You'll need to consider body corporate arrangements, though fees are generally lower than apartment complexes.

Commercial Investment Properties

For midwives looking to diversify beyond residential options, commercial properties present alternative investment loan options. These include retail shops, offices, and medical suites.

Commercial property investment requires:

• Higher initial loan amounts
• Thorough understanding of commercial lease structures
• Detailed analysis of tenant stability
• Different investment loan features compared to residential properties

Commercial investment property finance typically involves more complex investment loan applications. However, tenants often cover more expenses, and leases run longer, providing stable rental income streams.

Vacant Land

Purchasing vacant land represents a longer-term property investment strategy. While it doesn't generate immediate rental income, land can provide substantial capital growth in developing areas.

Considerations for land investment include:

• No rental income to offset loan repayments
• Limited tax benefits compared to income-producing properties
• Potential for future development
• Lower ongoing maintenance requirements

Most lenders offer reduced borrowing capacity for vacant land, and you'll typically need a larger investor deposit. Interest rate discounts may be less favourable than for established properties.

New Versus Established Properties

New Properties

New investment properties offer depreciation benefits that can maximise tax deductions. Advantages include:

• Reduced maintenance costs initially
• Modern fixtures appealing to quality tenants
• Higher depreciation claims on fixtures and fittings
• Potential builder warranties

However, new properties may command premium purchase prices and face higher vacancy rates if located in new developments with oversupply.

Established Properties

Established properties in proven locations often provide:

• Lower purchase prices relative to new builds
• Established infrastructure and amenities
• Proven rental history and vacancy rates
• Scope for value-adding renovations

When expanding your property portfolio, mixing new and established properties can balance tax benefits with capital growth potential.

Investment Loan Structures for Different Property Types

Your choice of property type impacts available investment loan features. Understanding calculating investment loan repayments helps determine affordability across different property categories.

Interest Only Investment Loans

Interest only investment structures suit properties where you expect strong capital growth. This approach:

• Reduces monthly repayments during the interest only period
• Maximises negative gearing benefits
• Frees up cash flow for additional investments
• Eventually converts to principal and interest repayments

Principal and Interest Loans

Principal and interest repayments build equity faster while providing:

• Lower overall interest costs
• Faster loan reduction
• Lower risk during property market fluctuations
• Improved position for future equity release

Financing Considerations Across Property Types

Variable Rate Versus Fixed Rate

Your variable interest rate or fixed interest rate choice affects your investment property rates. Variable rates offer:

• Rate discount opportunities when market rates fall
• Flexibility for extra repayments
• Access to offset accounts
• No break costs if you refinance

Fixed interest rates provide repayment certainty, beneficial when purchasing properties requiring stable cash flow projections.

Lenders Mortgage Insurance (LMI)

When your investor deposit is less than 20% of the property value, Lenders Mortgage Insurance typically applies. As a midwife, you may access Investment Loan options from banks and lenders across Australia offering LMI waivers for healthcare professionals.

LMI costs vary based on:

• Your loan to value ratio (LVR)
• Property type and location
• Your employment status and income
• Whether you're purchasing or looking at investment loan refinance options

Maximising Returns Across Property Types

Regardless of property type, successful investment requires understanding claimable expenses. Common tax benefits include:

• Investment loan interest payments
• Property management fees
• Maintenance and repairs
• Insurance premiums
• Depreciation on building and fixtures
• Body corporate fees
• Stamp duty costs (in some circumstances)

Negative gearing benefits allow you to offset property losses against your midwifery income, reducing taxable income while building long-term wealth.

Location and Property Type Selection

Property location significantly impacts investment success. Research areas offering:

• Low vacancy rates indicating strong rental demand
• Infrastructure development and employment growth
• Demographic trends matching your property type
• Historical capital growth patterns
• Proximity to amenities valued by target tenants

Combining the right property type with strong location fundamentals positions you for optimal portfolio growth and passive income generation.

Leverage Equity for Multiple Property Types

As your first investment property appreciates, you can leverage equity to acquire additional properties. This strategy enables:

• Diversification across property types and locations
• Accelerated portfolio growth
• Risk mitigation through asset variety
• Multiple income streams

Working with finance professionals experienced in equity release ensures you structure borrowing optimally across different property types.

Whether you're starting your property investment journey or diversifying an existing portfolio, understanding how different property types align with your financial goals is essential. Each property category offers distinct advantages, financing requirements, and returns profiles.

Your demanding career as a midwife deserves a property investment strategy that works as hard as you do. Professional guidance ensures your investment loan application considers all property options available, helping you access suitable investment property finance tailored to your circumstances.

Call one of our team or book an appointment at a time that works for you to discuss which investment property types align with your wealth-building goals.