ANZ Bank in 2026: Profits Up, Strategy Shift, and What It Means for Borrowers
ANZ Bank started 2026 with a strong financial result but also significant internal changes and strategic shifts that have a...
What is an Investment Property?
An investment property is real estate purchased with the intention of generating income or capital growth, rather than for personal living purposes.
This income may come from:
- Weekly rental payments from tenants
- Long-term property value growth
- Tax-related benefits (depending on individual circumstances)
Investment properties can include houses, apartments, townhouses, and, in some cases, commercial properties.
How Investment Property Loans Work
Investment property loans are similar to standard home loans but may have different lending criteria depending on the lender.
Key features often include:
- Interest rates that may be slightly higher than owner-occupied loans
- Different borrowing limits based on rental income and personal income
- Assessment of rental yield as part of loan approval
- Options for fixed or variable interest rate structures
Lenders typically assess your ability to manage repayments even if the property is temporarily vacant.
Key Factors Lenders Consider
When assessing an investment home loan application, lenders generally review:
- Your income and employment stability
- Existing debts and financial commitments
- Credit history and repayment behaviour
- Expected rental income from the property
- Loan-to-value ratio (LVR)
- Property type and location
These factors help determine borrowing capacity and overall loan risk.
Costs Associated with Investment Properties
In addition to the purchase price, investment properties may involve ongoing and upfront costs such as:
- Stamp duty and legal fees
- Loan interest repayments
- Property management fees (if using an agent)
- Maintenance and repairs
- Insurance (building and landlord insurance)
- Council rates and utility charges (if applicable)
These costs should be considered when calculating overall affordability.
Understanding Rental Yield and Growth
Investment decisions are often based on two main performance indicators:
- Rental Yield: The annual rental income compared to the property’s value
- Capital Growth: The increase in property value over time
A balanced investment strategy often considers both income stability and long-term growth potential.
Rental Yield Benchmarks by Location (2025)
| Location | Gross Yield |
|---|---|
| Sydney and Melbourne | typically 3% to 4% |
| Brisbane, Adelaide and Perth | typically 4% to 5% |
| Regional areas | typically 5% to 7%+ |
Example: A $600,000 property at 5% gross yield generates $30,000 per year in rent, or approximately $577 per week.
Use our Rental Yield Calculator to check your numbers.
Australian capital cities have averaged approximately 6% to 7% capital growth per annum over the long term. Past performance does not guarantee future results.
Build Long-Term Wealth Through Smarter Property Investment
Investment home loans can help you purchase rental properties, grow your property portfolio, and create additional income opportunities over time. FS Loan helps you understand lender requirements, compare loan options, and make more informed investment decisions.
Positive vs Negative Gearing:
Positively geared: Your rental income exceeds your total property expenses. The surplus is added to your taxable income.
Negatively geared: Your expenses exceed your rental income. The net loss can be offset against your other income, reducing your overall tax bill.
Example: $80,000 salary with a $15,000 rental loss = $65,000 taxable income. At the 32.5% marginal rate, that is a tax saving of approximately $4,875 per year.
Use our Property Cash Flow Calculator to model your numbers.
Speak to a tax accountant about your specific situation before relying on a negative gearing strategy.
Types of Investment Loan Structures
There are several common loan structures used for investment properties:
- Principal and Interest Loans: Regular repayments reduce both the loan balance and interest
- Interest-Only Loans: Lower initial repayments where only interest is paid for a set period
- Fixed Rate Loans: Interest rate remains unchanged for a fixed term
- Variable Rate Loans: The interest rate can change based on market conditions
Each structure has different implications for cash flow and long-term costs.
Things to Consider Before Investing in Property
Before purchasing an investment property, it is important to carefully evaluate:
- Total long-term repayment costs, not just monthly repayments
- Interest rate changes over time (especially for variable loans)
- Vacancy periods where rental income may be unavailable
- Market fluctuations affecting property value
- Your ability to manage financial stress during rate or income changes
- Long-term commitment to holding the property
A clear understanding of risks and responsibilities helps in making more stable investment decisions.
Understanding Your Options
Investment property buyers generally have several options depending on their goals:
- Buying in high-growth suburbs for long-term capital gains
- Choosing high-yield properties for higher rental income
- Using different loan structures based on cash flow needs
- Purchasing individually or through structures like trusts or companies (depending on advice and eligibility)
Each option has different benefits and trade-offs depending on financial goals and risk tolerance.
