Simple hacks to build wealth with rental property

Why nurses are turning to rental property for income

Steady shifts and predictable rosters make nursing income reliable, but you still trade time for money. An investment loan lets you buy a rental property that generates income while you work, building wealth in the background. Consider a registered nurse earning around $85,000 who wants to create a second income stream without picking up overtime. With an investment loan, that nurse could purchase a two-bedroom unit, collect rental income each month, and claim the interest as a tax deduction. Even if the rent doesn't cover all the costs initially, the property increases in value over time and the loan balance reduces, creating equity you can leverage later.

The new negative gearing rules that take effect from 1 July 2027 change how losses are treated, but they don't remove the tax benefits or the long-term wealth potential. Properties purchased before mid-May this year still qualify for full negative gearing, and eligible new builds purchased after that date retain the same treatment. For many nurses, the shift simply means being more deliberate about which property you buy and how the numbers work from day one.

How much can you borrow for an investment property?

Lenders assess investment loan applications differently to owner-occupier loans. They apply a serviceability buffer of 3 percentage points above the actual rate and typically calculate rental income at 80 per cent of the expected rent to account for vacancy periods and maintenance. Your borrowing capacity depends on your salary, existing debts, living expenses, and the expected rental return on the property.

As an example, a midwife earning $90,000 with no other debts and minimal living expenses might borrow around $550,000 to $600,000 for an investment property, depending on the lender and the expected rent. If that midwife already has a home loan with $400,000 owing, the investment borrowing capacity drops because lenders assess your ability to service both loans at the same time. The debt-to-income cap introduced in February limits how much you can borrow relative to your income, but it applies to new lending above six times your income, and most nurses purchasing their first rental property stay comfortably below that threshold. If you're looking to understand your borrowing power in more detail, the principles covered in our borrowing capacity guide apply to investment lending as well.

Interest only or principal and interest for rental property loans?

Interest-only repayments are common on investment loans because they reduce your monthly outgoings and maximise the tax deduction. When you pay principal and interest, part of each repayment reduces the loan balance and is not tax deductible. When you pay interest only, the full repayment is deductible, and you keep more cash in hand each month to cover other expenses or invest elsewhere.

Most lenders offer interest-only periods of up to five years on investment loans, after which the loan reverts to principal and interest unless you request an extension. The loan doesn't pay itself down during that period, so your equity growth comes entirely from property value increases. For a nurse purchasing a $500,000 unit with a 10 per cent deposit and borrowing $450,000 at current variable rates, an interest-only repayment might sit around $1,800 per month, while a principal and interest repayment on the same loan could be closer to $2,600. If the property rents for $2,200 per month, the interest-only structure keeps the shortfall manageable. You can read more about how these loans work in our interest only loans for nurses article.

What deposit do you need for an investment loan?

Most lenders require a minimum 10 per cent deposit for investment property, though some will lend at 90 per cent loan to value ratio only to borrowers with strong income and credit history. Borrowing above 80 per cent LVR means you'll pay Lenders Mortgage Insurance, which protects the lender if you default. LMI on an investment loan is typically higher than on an owner-occupier loan because the lender views investment lending as higher risk.

If you own your home and have built up equity, you can use that equity as your deposit instead of saving cash. A clinical nurse specialist who bought a home five years ago for $650,000 and now has a property worth $780,000 with $480,000 owing has around $300,000 in equity. That nurse could access up to 80 per cent of the home's value, which is $624,000, meaning around $144,000 in usable equity after accounting for the existing loan. That's enough to cover a 10 per cent deposit on a $600,000 investment property plus stamp duty and costs, without needing to save separately. If you're considering this approach, the guide on equity release loans for nurses explains how the process works and what lenders look for.

Variable rate or fixed rate for investment property?

Variable rate investment loans give you flexibility to make extra repayments, redraw funds, and refinance without break costs. Fixed rate investment loans lock in your repayments for a set period, which can help with budgeting, but they come with restrictions. If you fix and then want to sell the property or refinance before the fixed term ends, you'll likely pay break costs.

Most property investors choose variable rates because rental income and property values change over time, and you want the flexibility to adjust your strategy. Some split the loan, fixing part of the balance for certainty and leaving part variable for flexibility. A registered nurse purchasing a $520,000 townhouse with an investment loan of $470,000 might fix $200,000 for three years and leave $270,000 on a variable rate. That way, if the property increases in value and the nurse wants to access equity to buy a second property, the variable portion can be refinanced without penalty.

Claiming tax deductions and maximising rental property expenses

Interest on your investment loan is fully deductible when the property is rented or available for rent. Other claimable expenses include property management fees, council rates, water rates, building insurance, landlord insurance, repairs and maintenance, body corporate fees, and depreciation on the building and fixtures. Stamp duty and loan establishment fees are not immediately deductible but may be claimed over five years or added to the cost base for capital gains tax purposes.

The changes to negative gearing from July 2027 mean that if you purchase an established property after mid-May this year, any net rental loss can only be offset against other residential rental income or carried forward. It cannot reduce your salary income in the same year. If you buy an eligible new build, the existing negative gearing rules continue to apply, and you can offset losses against your nursing income as before. Either way, the deductions still exist, they just apply differently depending on when and what you buy. Speak to a tax specialist about how the new rules affect your situation, because the detail matters and the regulations are still being finalised.

How investment loan refinancing can improve your portfolio

Refinancing an investment loan can reduce your interest rate, access equity for further purchases, or switch from interest-only to principal and interest as your goals change. Many nurses refinance after a few years to consolidate debt, take advantage of lower rates, or pull equity out of a property that has increased in value.

In our experience, nurses who bought investment properties three to five years ago often have significant equity available now due to property value growth. Refinancing lets you access that equity without selling, which means you can keep the rental income and the long-term capital growth while using the funds for a second property or other investments. If you're considering this strategy, the article on investment loan refinancing for nurses walks through the steps and what lenders assess.

Choosing the right investment loan product for your strategy

Not all investment loan products suit every strategy. If you plan to buy multiple properties over the next few years, you want a loan structure that keeps your borrowing capacity available and your equity accessible. If you're buying a single property for long-term hold, a straightforward variable rate loan with offset and redraw might be all you need.

Lenders offer different features, rate discounts, and serviceability policies. Some lenders are more flexible with rental income calculations, others with high loan to value lending, and some offer better rates for nurses and healthcare professionals. We regularly see nurses who could have borrowed an additional $50,000 to $80,000 or saved $2,000 to $3,000 per year in interest simply by using a different lender with serviceability settings that suit their income structure. If you're looking at your first rental property, the buying your first investment property guide covers the broader process and what to consider before you start.

Rental property gives you an income stream that doesn't rely on rostered shifts, builds wealth through capital growth and loan reduction, and creates financial options down the line. Call one of our team or book an appointment at a time that works for you.

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