Proven Tips to Finance an Established Investment Property

Buying an established investment property gives you rental income from settlement and lets you build wealth without construction delays.

The structure you choose for an investment loan determines how much deposit you need, whether you claim full interest deductions, and how quickly you can leverage equity for portfolio growth. Understanding the legislative changes that take effect from 1 July 2027 matters if you're buying after mid-2026, because the tax treatment of your interest deductions and capital gains will depend on the exact date you exchange contracts and whether the property qualifies as a new build.

How Much Deposit You Need for an Established Investment Property

Most lenders require a 10 per cent deposit plus costs for established investment properties, though some will lend at 90 per cent loan to value ratio if you pay Lenders Mortgage Insurance.

Consider a registered nurse purchasing an established two-bedroom unit in an inner suburb. With a 10 per cent deposit, the borrowing sits at 90 per cent LVR and triggers LMI. At 20 per cent deposit, you avoid LMI entirely and may also access a rate discount. The difference in upfront cost can be $15,000 to $25,000 depending on the loan amount, but the lower LVR often results in a better investor interest rate that compounds over the life of the loan.

If you own a principal residence with available equity, you can use that equity as part or all of your deposit through equity release. Lenders assess the combined security, and you avoid drawing down savings. Structuring the borrowing across two loans, one against your home and one against the investment property, keeps your deductible and non-deductible debt separate for tax purposes.

Interest Only or Principal and Interest for Investment Loans

Interest only repayments on an investment loan reduce your monthly cost and maximise the tax deduction you claim, because the full loan balance remains deductible.

An interest only period typically runs for one to five years. During that time, your repayments cover interest charges but do not reduce the principal. This structure suits buyers who want to maximise cash flow or plan to pay down non-deductible debt on a principal residence first. Once the interest only period expires, the loan reverts to principal and interest unless you request an extension, and not all lenders grant multiple renewals.

If you take principal and interest repayments from the start, you reduce the loan balance each month and build equity in the investment property. The downside is higher repayments and a smaller tax deduction over time as the loan balance falls. Interest only loans for nurses are common in investment scenarios, but the right choice depends on your broader debt position and whether you are servicing other borrowings.

Fixed Rate or Variable Rate for Investor Loans

Variable rate investment loans let you make extra repayments and access offset accounts, giving you flexibility to manage cash flow as rental income fluctuates.

Fixed rate products lock in repayments for one to five years but usually restrict additional payments and do not offer offset. If rates fall during the fixed term, you remain locked in. If rates rise, you have certainty. Many nurses and midwives choose a split structure, fixing part of the loan for certainty on a portion of repayments and leaving the rest variable to take advantage of offset and allow extra payments when shifts increase income.

For properties purchased after 12 May 2026 that do not meet the new build criteria, negative gearing will be quarantined from 1 July 2027. That change does not affect the loan structure itself, but it does mean cash flow becomes more important. A variable rate with offset lets you park surplus income against the loan balance and reduce interest charges without losing access to funds if vacancy occurs or body corporate levies increase.

How Negative Gearing Rules Change from 1 July 2027

From 1 July 2027, net rental losses on established properties purchased after 12 May 2026 can only be offset against other residential rental income or carried forward, not against your nursing salary.

If you exchanged contracts on an established property before 7:30pm on 12 May 2026, or if you settle between then and 30 June 2027, you continue under the existing rules and can offset losses against salary and wages. Properties that meet the eligible new build definition, including dwellings constructed on previously vacant land or developments that increase dwelling numbers, retain full negative gearing regardless of purchase date.

The change matters most for buyers entering the market now who plan to hold an established property long term. You can still claim all the same deductions, including loan interest, property management, council rates, insurance, repairs and depreciation, but those deductions sit in a separate income bucket. If your portfolio includes multiple properties, rental income from positively geared properties can absorb the losses from negatively geared ones, so the quarantine has less impact as your portfolio grows.

Serviceability and Debt-to-Income Limits for Investment Loans

Lenders assess investment loan serviceability using a buffer of 3 percentage points above the actual rate and apply a discount to rental income, usually 80 per cent to account for vacancy and management costs.

From 1 February 2026, lenders must also limit the proportion of new investment loans written at debt-to-income ratios of 6 times or greater to 20 per cent of their investor portfolio. That cap is separate from the owner-occupier cap, so your borrowing capacity as an investor is not reduced by the volume of owner-occupier lending the bank writes. However, if your total debt exceeds 6 times your gross income, you may need a larger deposit or additional income evidence to fit within the lender's allocation.

As a registered nurse or midwife, your income is generally straightforward to verify through payslips and a letter of employment. If you work agency shifts or hold multiple casual contracts, a broker familiar with health sector income can structure your application to reflect the stability of that income and avoid unnecessary discounting by the lender's policy.

Refinancing an Existing Investment Loan

Refinancing lets you access equity as your property increases in value, switch from interest only to principal and interest or the reverse, or move to a lender with a lower rate.

If you purchased an investment property several years ago and the value has increased, you may now be sitting at a lower LVR without having paid down much principal. That equity can be released to fund a deposit on a second property, supporting portfolio growth. The refinance application is assessed on current serviceability, so rental income from the existing property strengthens your position.

Investment loan refinancing for nurses also makes sense if your current lender no longer offers offset on investment loans or if your fixed rate is about to expire and the revert rate is uncompetitive. Lenders periodically adjust their appetite for investor lending, and the rate you were offered two years ago may no longer reflect the discount available today.

Capital Gains Tax Changes from 1 July 2027

From 1 July 2027, capital gains on investment properties are taxed using cost base indexation and a minimum 30 per cent rate on real gains, replacing the 50 per cent discount for gains that accrue after that date.

Gains that accrued before 1 July 2027 remain under the existing rules, so if you purchase now and sell in ten years, part of the gain is calculated under the current discount and part under the new indexation method. Eligible new build properties retain an election between the two systems, giving buyers of qualifying new builds more flexibility at sale.

The change does not affect the loan structure, but it does influence the after-tax return on an investment property held long term. Properties grandfathered under the old negative gearing rules and subject to the 50 per cent CGT discount on the full gain remain the most tax-effective from a legislative perspective, which makes established properties purchased before 12 May 2026 particularly valuable if you can find one still available on the market.

Claimable Expenses Beyond Loan Interest

Loan interest is your largest deduction, but you also claim property management fees, landlord insurance, council rates, water charges, strata levies, repairs, and depreciation on fixtures and fittings.

Depreciation is a non-cash deduction that reduces taxable income without any outgoing each year. Established properties built after 1985 still offer depreciation on the building structure, though at a lower rate than new builds. Plant and equipment items such as ovens, air conditioners, blinds and carpets can be depreciated regardless of the property age, provided you obtain a quantity surveyor's report.

Stamp duty on the purchase is not deductible as an ongoing expense, but it forms part of the cost base for capital gains tax. Legal fees and loan establishment costs incurred to purchase or refinance the investment are also claimable, either in the year incurred or amortised over five years depending on the nature of the expense. Keeping records of all costs from purchase through to sale ensures you maximise tax deductions and minimise capital gains tax when you eventually sell.

Call one of our team or book an appointment at a time that works for you. We structure investment loan applications for nurses and midwives across Australia and explain how the new tax rules apply to your specific purchase date and property type.

Frequently Asked Questions