Unlock the Secrets to Buying an Investment Property

Buying an established investment property changed substantially from 1 July 2027 when negative gearing rules were quarantined for most residential dwellings purchased after May 2026.

For investors in Everton Park, the shift means that net rental losses on properties acquired recently can no longer be offset against salary or wage income. Those losses now sit in a separate category and can only reduce other residential rental income or be carried forward to offset future rental income or capital gains from residential property. The change does not affect properties purchased before 7:30pm AEST on 12 May 2026, which remain grandfathered under the old rules. Between May 2026 and June 2027, a transitional period applied where buyers could use the old negative gearing rules until 30 June 2027.

The shift also introduced a new capital gains tax calculation for affected properties. From 1 July 2027, the 50 per cent CGT discount is replaced with cost base indexation and a minimum 30 per cent tax rate on real gains. For owners holding property acquired before July 2027, gains that accrued before that date continue under the prior rules.

Understanding these changes is central to selecting the right loan structure and the right property. The rest of this article explains how investment loans work for established dwellings and how lenders assess applications in the current environment.

How Lenders Assess Rental Income for Established Properties

Lenders use a haircut when including rental income in your servicing calculation. Most apply 80 per cent of the gross rent to account for vacancy, maintenance and other holding costs. If a property in Everton Park generates $550 per week, the lender will typically credit $440 per week toward your borrowing capacity.

Vacancy rates in Everton Park have been below 1 per cent for the past three years, meaning rental income is relatively stable. However, lenders apply their haircut regardless of local conditions. The assessment also includes a serviceability buffer of 3 percentage points above the product rate, meaning your income must be able to service the loan at a notional rate well above what you will pay initially.

Consider a buyer who earns $95,000 per year and wants to borrow $550,000 to purchase an established townhouse. With rent of $550 per week, the lender credits $440 per week or roughly $22,880 annually. After tax deductions, the net benefit might lift borrowing capacity by around $60,000 to $80,000, depending on your marginal tax rate and other commitments. Because rental losses are now quarantined, you cannot use those losses to reduce taxable income from your salary, which means the deduction benefit is limited to the rental income stream itself.

Interest Only or Principal and Interest Repayments

An interest only period allows you to hold repayments lower during the first few years, which can improve cash flow if the property is negatively geared under the quarantine rules. Lenders typically offer interest only terms of one to five years, after which the loan reverts to principal and interest.

Under the quarantine rules, holding costs matter more than they did under the old negative gearing system. If you cannot offset losses against other income, you need either sufficient rental income to cover the interest or enough surplus cash flow to absorb the shortfall each month. An interest only arrangement reduces that shortfall compared to principal and interest, but it also means you are not building equity through principal reduction.

For investors buying in Everton Park who expect capital growth to drive returns, interest only can make sense during the early years. If your strategy relies on paying down the loan to build equity, principal and interest from the start may suit better. Refinancing after the initial interest only period is common, either to extend the interest only term with a new lender or to switch to principal and interest at a lower rate.

What Loan to Value Ratio Can You Access Without Lenders Mortgage Insurance

Lenders Mortgage Insurance is charged when your deposit is below 20 per cent. For investment lending, most lenders cap loans at 90 per cent LVR with LMI and 80 per cent without. A small number of lenders will lend up to 95 per cent for investment purposes, but policy varies and rates are higher.

LMI is a one-off premium that can be capitalised into the loan amount, but it adds to your borrowing and does not protect you if you default. It protects the lender. At 90 per cent LVR, LMI can cost $15,000 to $25,000 depending on the loan amount and lender.

If you are leveraging equity from your Everton Park home to fund the deposit, you may be able to reach 80 per cent LVR across both securities without LMI. Lenders assess the combined position. If your owner-occupied property has $200,000 in usable equity and you are purchasing an investment property, the lender may allow you to borrow up to 80 per cent of the investment property value plus enough to cover stamp duty and costs, provided your total borrowing across both properties does not exceed 80 per cent of the combined value.

Variable Rate or Fixed Rate for Investment Property Loans

Variable rates currently sit below fixed rates for most lenders, and they offer flexibility to make extra repayments or refinance without break costs. Fixed rates provide certainty over repayments but lock you in. If you want to sell or refinance before the fixed term ends, break costs can be substantial.

For investment property, the ability to respond to market changes and adjust your loan structure is often more valuable than rate certainty. Under the new quarantine rules, investors need to manage cash flow more actively because rental losses stay within the residential rental income pool. A variable rate allows you to redraw or offset funds if the property sits vacant, and you can refinance to a better rate as your equity position improves.

Some investors split their loan between variable and fixed, which provides partial certainty while retaining flexibility on the variable portion. The split proportion depends on your risk tolerance and how much cash flow buffer you hold.

How the Debt to Income Cap Affects Larger Investment Loans

From 1 February 2026, lenders are restricted in the portion of new investor loans they can write at a debt to income ratio of six times gross income or higher. The cap applies separately to investor and owner-occupier portfolios, and it is measured quarterly for large lenders.

If your total borrowing including the new investment loan exceeds six times your gross income, you may find fewer lenders willing to approve the loan or higher rates applied. For Everton Park buyers with existing owner-occupied debt, the DTI cap can limit how much you can borrow for investment.

In our experience, investors with strong rental income and a clear servicing position still obtain approval, but lender choice narrows once you cross the six times threshold. Paying down existing debt or increasing your deposit can bring your DTI below the cap and restore access to a wider panel of lenders.

Deductible Expenses Beyond Interest Under Quarantine Rules

Interest is not the only claimable expense on an investment property. You can also deduct rates, body corporate fees, landlord insurance, property management fees, repairs and maintenance, and depreciation on plant and equipment. These deductions reduce your rental income and therefore your taxable rental income, but they do not affect your salary or wage income under the quarantine rules.

For an established property in Everton Park, body corporate fees typically range from $1,000 to $2,500 per year for a townhouse and $3,000 to $6,000 for an apartment. Property management fees are usually 7 to 8 per cent of the gross rent plus letting fees. Landlord insurance adds another $400 to $800 annually.

Because losses are quarantined, the value of these deductions is limited to the extent you have other residential rental income or future gains to offset. If you are building a portfolio, quarantined losses from one property can offset positive income from another. If this is your only investment property and it runs at a loss, those losses carry forward until you either generate rental profit or sell the property and realise a capital gain.

Stamp Duty and Settlement Costs in Queensland

Stamp duty on investment property in Queensland is calculated on a sliding scale with no concessions. For a property purchased at $600,000, stamp duty is approximately $18,925. For a property at $700,000, stamp duty is around $23,925. These amounts are in addition to your deposit and must be paid at settlement.

Other settlement costs include legal fees, building and pest inspections, loan establishment fees, and valuation fees. Total settlement costs typically add another $3,000 to $5,000 depending on the lender and the complexity of the transaction.

If you are using equity to fund the deposit, you can sometimes borrow up to 80 per cent of the purchase price plus stamp duty and costs, provided your total LVR across all securities remains at or below 80 per cent. This approach minimises the cash you need to contribute upfront but increases your total debt.

Choosing the Right Loan Structure for Portfolio Growth

Loan structure matters more under the quarantine rules because your ability to offset losses is restricted. If you plan to acquire multiple properties, you want each loan to remain separate so that you can refinance, sell or restructure individual properties without affecting the others.

A single loan secured by multiple properties limits your flexibility. If you want to sell one property, the lender may require you to discharge the entire facility or revalue all securities. Separate loans for each property allow you to manage each investment independently.

You also want to preserve equity in your owner-occupied property where possible. Interest on borrowings secured by your home is only deductible if the funds are used to acquire or hold an income-producing asset. If you refinance your home to release equity for an investment deposit, the interest on that additional borrowing is deductible. If you later refinance to release equity for a private purpose, the interest on that portion is not deductible even though the loan is secured by the investment property.

Keeping loans and purposes separate from the start avoids the need to apportion interest deductions later. Borrowing capacity modelling before you commit to a purchase helps identify the right structure and the maximum you can borrow without limiting future growth.

Call one of our team or book an appointment at a time that works for you at Alpha Financial. We access investment loan options from banks and lenders across Australia and provide structure advice tailored to your circumstances and the current legislative settings.

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