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Investment Property Loans
Structured so this purchase does not block the next one. That is the whole job.
Investment lending
Investment lending, and why property two is harder than property one
Every investment property you buy reduces what you can borrow for the next one, even when the property pays for itself. Lenders assess the new loan repayment at roughly three percentage points above the actual rate, then count only about 80% of the rent. That gap is deducted from your capacity each time. The first purchase is an income test. The fourth is a structuring exercise, where the order you use lenders in matters as much as the numbers.
Most of our clients own between one and five properties. The conversation is almost never about rate. It is about whether the next purchase is possible, and what has to happen now to keep the one after that open.
Shane Heness has been broking for eight years and investing in property personally since 2015, which is the reason this page reads the way it does.
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Investment Loans
What we can help you with
Borrowing Capacity Across Lenders
Calculators differ enough to change the answer by hundreds of thousands. We compare rather than accept one number.
Portfolio Structuring
Each property on its own security, in a deliberate lender order, so one policy change cannot freeze everything.
Equity Access
Usable equity is 80% of value less the loan, not the full gap. We work out what is actually available.
Interest Only and P&I
Cash flow against servicing. Interest only helps one and can hurt the other, depending on the lender.
Cross-Collateralisation Advice
Why linking your properties feels efficient and rarely is, and how to unwind it if you already have.
Self-Employed and Trust Structures
Company, trust or sole trader. Whether a lender counts trust distributions can move capacity by six figures.
The three things that shrink your capacity each time
1. The assessment rate
Lenders do not assess your loan at the rate you will pay. They add a buffer, generally around three percentage points, to test affordability if rates rose. A loan at 6% is assessed at roughly 9%. Applied across a portfolio, that buffer compounds.
2. Rental shading
Lenders do not count all your rent either. Most apply a haircut of around 20% for vacancy, management fees, rates and maintenance. Only about 80% of the rent reaches the calculation.
3. Existing debt counted in full
Every other loan you hold is counted at its assessed repayment, including loans with other lenders. Credit card limits are counted as if fully drawn whether or not you use them, usually at around 3.8% of the limit per month.
| Item | Real life | Servicing calculator |
|---|---|---|
| Loan | $650,000 at 6.0% | $650,000 assessed at 9.0% |
| Monthly repayment counted | $3,898 (P&I) | $5,230 (P&I at assessment rate) |
| Rent | $650 per week, $2,817 per month | $2,254 per month (80% shaded) |
| Monthly position | Negative $1,081 | Negative $2,976 |
Illustrative only. Assessment rates, shading percentages and repayment calculations vary by lender and change over time.
That difference, roughly $1,900 a month in this example, is what disappears from your capacity for the next purchase. It is not an error in the calculator. It is the calculator doing its job.
What actually constrains each purchase
| Purchase | Usual binding constraint | What matters most |
|---|---|---|
| First investment | Deposit and income | Structuring it so it does not block the next one |
| Second | Servicing | Lender choice. Calculators differ enough to change the answer |
| Third | Servicing and lender policy | Lenders with better rental treatment, and no cross-collateralisation |
| Fourth and beyond | Debt to income ratio | Total debt against total income, and which lenders still have appetite |
Debt to income: the ceiling most investors hit
Debt to income, or DTI, is total debt across every lender divided by gross household income. A household earning $200,000 with $1.2 million of debt has a DTI of six. Most lenders treat six as the point where a file gets extra scrutiny, and several will not go beyond it. A handful will, at a price.
On typical Western Sydney incomes and prices, DTI is what stops the fourth purchase, not the deposit. Investors planning a portfolio who have not looked at their DTI are usually planning against the wrong constraint.
What moves it: paying down debt, increasing income including rent that is now counted after twelve months of history, closing unused credit card limits, and selling a low performing asset to recycle the debt into a better one.
Yield does more work than you think
Where you buy changes how much capacity the purchase consumes. This is the single most under-appreciated lever in portfolio building, and it is why clients who live nowhere near Campbelltown keep buying there.
| Measure | Campbelltown house | Castle Hill house |
|---|---|---|
| Purchase price | $1,017,000 | $2,560,000 |
| Loan at 80% | $813,600 | $2,048,000 |
| Weekly rent | $620 | $975 |
| Rent counted after 20% shading, monthly | $2,150 | $3,380 |
| Repayment at a 9% assessment rate, monthly | $6,546 | $16,479 |
| Monthly gap deducted from your capacity | $4,396 | $13,099 |
Illustrative only, at a 9% assessment rate on 30 year principal and interest with 20% rental shading. Median prices and rents from CoreLogic data via Your Investment Property, 12 months to June 2026 for Castle Hill and to May 2026 for Campbelltown. Not a quote.
Three Campbelltown purchases cost roughly the same borrowing capacity as one Castle Hill purchase. Whether that is the right strategy depends on your view of growth against yield, but the servicing arithmetic is not a matter of opinion.
Our Western Sydney locations pages set out median prices and gross yields across fifteen suburbs, with the sample size behind each figure.
Equity: what you have versus what you can use
Most investors overestimate their usable equity, because they count the gap between what they owe and what the property is worth. Lenders do not calculate it that way.
Usable equity is generally 80% of the current valuation less the existing loan balance. The 20% buffer is not available, because releasing it would take the loan above 80% and trigger lender mortgage insurance on the release.
| Property | Current value | Loan balance | 80% of value | Usable equity |
|---|---|---|---|---|
| Home | $1,150,000 | $540,000 | $920,000 | $380,000 |
| Investment 1 | $720,000 | $560,000 | $576,000 | $16,000 |
| Investment 2 | $680,000 | $610,000 | $544,000 | Nil |
| Total | $2,550,000 | $1,710,000 | $396,000 |
Illustrative only. Valuations are lender ordered and frequently come in below owner expectations.
That portfolio shows $840,000 of raw equity and $396,000 of usable equity, almost all of it in one property. That is normal. Note also that having usable equity is not the same as being able to borrow against it. Equity gives you the deposit. Servicing decides whether you get the loan.
Structuring mistakes that cost you the next purchase
Cross-collateralisation
Where one lender holds two or more of your properties as security for the same loans. It feels efficient and it is not. It ties your properties together, makes selling one complicated, and hands a single lender control over your whole position. Keep each property standing on its own security wherever possible.
Redraw instead of offset
Paying extra into an investment loan and redrawing it later can change the tax deductibility of that portion. An offset account achieves the same cash flow result without touching the loan balance. That is a conversation for your accountant, but the loan has to be set up to allow it.
Taking the whole equity release at once
Releasing equity in one large lump and parking it can hurt servicing, because the full loan is counted whether or not the funds are deployed. Releasing in line with what you are about to buy usually tests better.
Spending your best lender first
Use the most generous lender on a purchase any lender would have approved and you have wasted it. Use them last, when the file is hardest, and they are there when you need them. This is the part of the job that is invisible at the time and decisive three years later.
The process
How an investment purchase runs
Realistic durations. An investment purchase runs four to six weeks from application to settlement where the file is clean, longer where a portfolio has to be untangled first.
- 1Day 1, 45 to 60 minutes
Portfolio review
Everything you own, everything you owe, and what you are trying to do over the next three to five years. We calculate your current debt to income ratio on this call.
- 2Days 2 to 5
Capacity comparison across lenders
We run your position through several lender calculators, not one. On a portfolio file the spread between the most and least generous is routinely $300,000 or more.
- 3Days 3 to 7
Written loan strategy
A document setting out the options, the numbers, the recommended lender for this purchase and the lender we are holding back for the next one, with reasons.
- 4Week 1 to 2
Equity release or pre-approval
Where equity is funding the deposit, that release runs first. Pre-approval follows so you can bid with confidence.
- 5Week 2 to 3
Application and submission
Full submission with a written credit summary explaining the portfolio position. Portfolio files are read by senior assessors and presentation matters.
- 6Week 3 to 4
Valuation and approval
We chase the valuation, handle the assessor questions and check the approval conditions before you rely on them.
- 7Week 4 to 6
Loan documents and settlement
We check the documents against what was approved, coordinate with your solicitor and confirm the structure is what we designed rather than what the lender defaulted to.
- 8Every 12 months
Annual review
Rate review against the market, updated capacity, updated DTI, and a check on whether any property has grown enough to release equity for the next purchase.
FAQ
Common questions about investment loans
Answers to the questions we are asked most often. If yours is not here, ask us directly.
Because the lender counts 100% of the new loan repayment at an assessment rate roughly 3% above the actual rate, but only counts around 80% of the rent. The shortfall between those two figures is deducted from your capacity for the next purchase. A property that is cash flow neutral in real life is usually cash flow negative in a servicing calculator.
Debt to income is your total debt across all lenders divided by your gross annual household income. Most lenders flag files above six times income and apply extra scrutiny, and some decline outright. On a typical Western Sydney income, the DTI ceiling is usually what stops the fourth purchase rather than the deposit.
Usually not. Stacking every property with one lender concentrates your exposure, means one policy change can freeze your whole portfolio, and often leads to cross-collateralised security. Spreading across lenders in a deliberate order keeps options open for longer.
It helps cash flow but not always servicing. Many lenders assess an interest only loan on the principal and interest repayment over the remaining term after the interest only period ends, which can make the assessed repayment higher than a straight principal and interest loan. Whether it helps depends on which lender is assessing it.
Generally 80% of the current valuation less your existing loan balance. The final 20% is not available because releasing it would push the loan above 80% and trigger lender mortgage insurance. On a $1,150,000 home with a $540,000 loan, that is $380,000 rather than the $610,000 gap people expect.
It is where one lender holds two or more of your properties as security for the same set of loans. It ties the properties together, makes selling one messy because the lender reassesses the whole position, and gives a single lender control over your entire portfolio. Keeping each property on its own security is almost always better.
There is no universal cap, but some lenders limit the number of investment loans they will write to one borrower and most tighten as your debt to income ratio climbs. The practical limit is usually set by DTI and servicing rather than a stated property count.
Some do and some do not, and it varies by lender rather than by law. Where a lender does count the tax benefit of negative gearing, it can add meaningfully to assessed income. Where it does not, the same file looks worse. This is one of the reasons capacity varies so widely between lenders.
Not with nothing, but you may not need cash. Equity in an existing property can fund the deposit and costs through an equity release, which is the most common way our clients buy their second and third properties. You still need servicing capacity, which is the more common constraint.
It depends on your cash flow, your tax position and which lender is assessing you. Interest only preserves cash flow during an accumulation phase and keeps the deductible balance intact, but some lenders assess it harshly. Principal and interest builds equity and often tests better in servicing. We model both.
Yes, and it is usually preferable to paying extra into the loan and redrawing later, because redraw can affect the deductibility of that portion. An offset keeps the loan balance intact while reducing the interest charged. Confirm the tax treatment with your accountant.
They count them, at their own assessed repayment rather than your actual repayment. Some lenders assess other lenders debt at the actual repayment plus a small buffer, others apply their full assessment rate to it. That difference alone can move your capacity by six figures across a portfolio.
Yes, significantly. Lenders count the limit as if fully drawn, typically assessing around 3.8% of the limit as a monthly repayment. A $30,000 unused limit is therefore roughly $1,140 a month against your capacity, which is around $150,000 of borrowing. Closing unused limits is the cheapest capacity you will ever buy.
There is generally no fee to you in the first place, because the lender pays the broker on settlement. Where a fee does apply, its deductibility depends on the purpose of the loan and is a question for your accountant.
Annually, at the settlement anniversary. Lenders reprice their back books, and a loan settled three years ago is rarely on the rate that lender would write today. We diarise this for clients so the review happens without anyone having to remember.
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