The short answer
To buy an investment property, set your budget and goals, work out what you can borrow and how much deposit or equity you have, then research the location and property before you make an offer. Allow for the costs to buy (stamp duty, conveyancing, inspections) and to own (rates, insurance, land tax, management, repairs). Moneysmart says not to rely on rent to cover the loan, as there may be times the property is empty.
Step by step
- Know why you’re buying. Moneysmart suggests making the property part of an investment plan that fits your goals and how much risk you can take. Rental income and growth in value pull in different directions when you choose a property.
- Work out your borrowing power. Lenders look at your income, your current debts and the expected rent. They may not count all of the rent. Our borrowing power calculator gives a starting figure.
- Find your deposit. Savings, equity in your home, or both. With less than 20% of the price, lenders usually charge lenders mortgage insurance. Our equity calculator shows how much equity you might use.
- Get pre-approval. It tells you your price range before you make offers. See how pre-approval works.
- Research the location and the property. See the checklist below.
- Do the numbers on the actual property. Compare the expected rent with the repayments and every ongoing cost. Check you could cover a shortfall for a long time, and all the costs for a while if there were no tenant.
- Set up the loan. How the loan is set up matters later, for tax records, for selling and for buying again. See below.
The costs to plan for
To buy: stamp duty, conveyancing and legal fees, search fees, and pest and building reports. Our stamp duty calculator covers each state.
To own: council and water rates, building and landlord insurance, strata or body corporate fees, land tax, property management fees, and repairs and maintenance. Plus the loan repayments.
To sell: agent’s fees, advertising and legal fees, and possibly capital gains tax if the property has gone up in value.
A unit rents for $2,400 a month. The loan repayments are $2,600 a month and the other costs (rates, insurance, strata, management and a repairs allowance) come to $600 a month. That leaves a shortfall of $800 a month to cover from your own income, before any tax effect.
A simplified illustration only. Your figures depend on the property, the loan and your circumstances.
The risks to weigh up
Moneysmart lists the main risks of investing in property. In short:
- A gap between rent and costs. Whatever the rent doesn’t cover, your own income has to.
- Rate rises. Each rise lifts the repayments, often with no matching rise in rent.
- Empty weeks. Between tenants, the property earns nothing and the costs keep coming.
- Slow to turn into cash. A property is sold whole, and a sale takes months, so it’s a poor emergency fund.
- Prices can drop. If the value falls below the loan, selling may not clear the debt.
- Big transaction costs. Stamp duty when you buy and agent’s fees when you sell take a bite out of any gain.
Moneysmart also suggests spreading your investments beyond property, so your money isn’t all in one market.
Thinking about your first or next investment property? Our investor home loans page shows how we help, or we’ll work out what you can borrow and how to set up the loan.
Book My Investor ChatChoosing the location and property
- Look at rental demand and vacancy rates in the area, as well as past price growth.
- Check for planned changes nearby, such as rezoning or new transport, that could affect prices.
- Features tenants look for: a second bathroom, parking, and access to schools, shops and transport.
- Think about upkeep. The age and type of property affect repair and maintenance costs.
Moneysmart warns to be careful with property investment seminars that use high-pressure sales tactics, and with groups of providers who recommend each other’s services. Take your time and check any advice on its own merits.
Setting up the loan
- Separate loans. Many investors use a separate loan or split for the investment, which can make the interest and the home debt easier to track. Ask a registered tax agent what suits you.
- Watch the security. Using your home and the investment as security for one loan can make it harder to sell or refinance later. See cross-collateralisation.
- Interest-only or principal and interest. Interest-only repayments are lower at first, but Moneysmart notes they rise when the interest-only period ends.
- Compare investment rates. Lenders often price investment loans differently from loans for the home you live in. Our investment loan rates page lists them with comparison rates.
Tax
You can claim many investment property expenses, including loan interest, but you still pay them up front. The ATO says the rules for negative gearing and capital gains tax change from 1 July 2027. Check the ATO page for the current position, see our negative gearing guide, and ask a registered tax agent how they apply to you before you buy.
Who does what
As mortgage brokers, we work out your borrowing power, compare loans from lenders on our panel, help set up the loan and handle the paperwork. We don’t choose the property for you, and we don’t give tax or investment advice. We don’t charge you for our service. Lenders pay us a commission if you go ahead with a loan.
Sources: Moneysmart (ASIC), “Buying an investment property”, read 9 November 2026; Australian Taxation Office, “Tax reform – Boosting home ownership – Reforming negative gearing and capital gains tax”, last updated 29 June 2026, read 9 November 2026.
Mortgage broker at My Finance Consultants. Daniel compares home loan options from a panel of 40+ lenders for refinancers, investors and home buyers, by phone or video, evenings included. About Daniel
General information only. It doesn’t consider your objectives, financial situation or needs, and it isn’t tax, legal or financial product advice. Lending criteria, fees and charges apply.