What are the Different Investment Property Types?

The property type you choose determines not just your upfront costs but also how lenders assess your application, what loan features you can access, and how your repayments are structured.

An investment loan is structured around the asset you're purchasing, and not all property types are treated the same way by lenders. An apartment in a high-density building attracts different servicing rules and valuation approaches compared to a standalone house on a quarter-acre block. That difference flows through to your deposit requirement, your borrowing capacity, and whether you can access interest-only terms or offset accounts.

Apartments and Units

Apartments and units are assessed by lenders based on size, building composition, and body corporate structure. A two-bedroom apartment in a low-rise complex with a strong body corporate sinking fund will typically receive more favourable terms than a studio in a building with deferred maintenance or a high proportion of short-term rentals.

Lenders apply additional scrutiny when more than 50 per cent of a building's units are owned by a single entity or where the body corporate has not adequately funded its sinking or administrative accounts. In those cases, some lenders will either reduce the maximum loan to value ratio or decline the application outright. Properties under 50 square metres may face similar restrictions, and servicing is often adjusted to account for higher vacancy rates in smaller formats.

Consider a buyer looking at a one-bedroom unit in a CBD-adjacent suburb. The property is part of a mixed-use building with retail tenancies at ground level and 120 residential units across eight floors. The building was completed four years ago, and the body corporate records show a shortfall in the sinking fund due to earlier remediation works. In this scenario, the buyer's lender applies a maximum LVR of 70 per cent instead of the standard 80 per cent, which means the buyer needs a larger deposit and must also cover Lenders Mortgage Insurance if they wish to proceed at 80 per cent with a different lender willing to accept the risk. The lender also reduces the assessed rental income by 5 per cent to reflect higher vacancy and turnover in that building type, which affects the buyer's overall borrowing capacity.

Townhouses and Terraces

Townhouses and terraces combine characteristics of both apartments and houses, and lender assessment reflects that middle ground. These properties are typically held under either strata title or community title, which means body corporate fees apply, but the fees are generally lower than those for high-rise buildings.

A terrace in an inner-city suburb with its own street frontage and minimal shared infrastructure is often viewed more favourably than a townhouse in a large complex with shared driveways, common walls, and significant common property. Lenders will review the body corporate documentation for any townhouse or terrace under strata or community title, and the same principles that apply to apartments also apply where the building is affected by ownership concentration or underfunded maintenance.

In our experience, Queensland investors often prefer townhouses in growth suburbs where land is constrained but demand for medium-density housing remains strong. These properties tend to attract families and long-term tenants, which supports stable rental income and lower vacancy compared to smaller apartment formats.

Standalone Houses

Standalone houses on freehold title are the most straightforward property type for lenders to assess. There is no body corporate involvement, no shared infrastructure risk, and valuations are typically based on comparable sales in the immediate area without adjustment for building defects or strata complexity.

Borrowing capacity for a house is generally determined by the rental income the property can generate, the borrower's other commitments, and the deposit available. Most lenders will lend up to 80 per cent of the property value without requiring Lenders Mortgage Insurance, and interest-only terms are widely available on investment loans for houses where the borrower meets standard serviceability requirements.

Houses also allow for future capital works that can be undertaken without body corporate approval, such as adding a deck, renovating interiors, or constructing a granny flat where council permits allow. That flexibility can support portfolio growth over time, particularly where the investor intends to add value through improvements or subdivision.

Dual Occupancy and Duplex Properties

Dual occupancy and duplex properties refer to two dwellings on a single title or two dwellings on separate subdivided titles. Where the dwellings remain on a single title, some lenders will treat the property as a standard residential investment and assess it based on the combined rental income from both units. Other lenders classify single-title dual occupancy as semi-commercial, which can limit loan options and reduce the maximum LVR to 70 per cent.

Where the duplex is on subdivided titles and you are purchasing only one side, the property is treated as a standard residential unit or townhouse, depending on its structure. If you are purchasing both sides, lenders will aggregate the exposure and assess both your serviceability and the total loan amount accordingly.

In a scenario where an investor purchases a duplex on a single title in a growth corridor near the Sunshine Coast, with each side renting for $550 per week, the combined rental income is strong enough to support interest-only repayments at an 80 per cent LVR with most major lenders. However, the investor's ability to later subdivide and sell one side may be affected by local council zoning, and any future subdivision would require the existing loan to be split or refinanced across the two new titles.

Properties with Commercial Zoning or Mixed Use

Properties with commercial zoning or mixed use, such as a residential unit above a shop or a house on land zoned for future commercial development, are assessed differently to standard residential property. Some lenders will decline these applications outright, while others will offer finance under their commercial loans division with different rates, terms, and deposit requirements.

Where a residential dwelling sits on commercially zoned land but is being used solely for residential tenancy, some lenders will accept the application under their residential investment criteria provided a valuation confirms the primary use is residential and the property is not affected by any current or imminent commercial development conditions. Others apply a hybrid approach, requiring a larger deposit and treating the loan as non-conforming.

Claimable expenses and tax treatment may also differ depending on how the ATO classifies the property, particularly where the land is held as trading stock or the dwelling is incidental to a broader commercial operation. Investors considering these property types should seek advice from a licensed tax adviser before proceeding.

How Lenders Assess Rental Income Across Property Types

Lenders assess rental income by applying a shading factor to the gross rent, typically between 70 per cent and 80 per cent depending on the lender and the property type. The shading accounts for vacancy, maintenance, and body corporate fees where applicable. Apartments and units are often shaded more heavily than houses, particularly where the vacancy rate in the area is above the national average or where the building has a high proportion of investor-owned units.

Rental income is verified through a current lease agreement or a rental appraisal from a licensed property manager. Where the property is purchased vacant or the rent is below market, lenders will use the appraised market rent rather than the actual lease figure, provided the appraisal is less than 90 days old and prepared by an independent agent.

For properties with multiple income streams, such as a duplex or a house with a separate granny flat, lenders will assess each income stream separately and may apply different shading to each depending on whether the tenancies are on separate leases and whether the dwellings have independent access and facilities.

Selecting the Right Property Type for Your Borrowing Capacity

Your borrowing capacity is a function of your income, your existing debts, the rental income the property can generate, and the deposit you have available. Property type affects both the rental income and the deposit required, which means the type you choose will directly determine how much you can borrow.

An apartment in a high-demand suburb with strong rental yields may support higher borrowing than a house in the same area if the rent is sufficient to offset the higher body corporate fees and the lender's shading. Conversely, a house with lower gross rent but no body corporate and lower vacancy may perform just as well from a serviceability perspective, particularly if you plan to hold the property long term and want the flexibility to make improvements.

If you are building a portfolio, the property type also affects how much equity you can access for future purchases. Houses on freehold title are generally easier to leverage for refinancing or equity release compared to apartments in buildings with high owner concentration or deferred maintenance.

Call one of our team or book an appointment at a time that works for you. We'll review your circumstances, compare loan options from lenders across Australia, and help you structure your application around the property type that aligns with your investment strategy and borrowing capacity.

Frequently Asked Questions