What Not to Ignore When Buying Investment Property

The rules around property investment changed on Budget night in May 2026, and many Miranda residents considering an investment property are still working out what that means for their plans.

If you're looking at investment property now, you're dealing with stricter serviceability, a different tax landscape from 1 July 2027, and lenders who are applying tighter rental income assessments than they were a year ago. The approach that worked for someone who bought in early 2025 doesn't necessarily work for you now.

How Lenders Assess Rental Income on Investment Properties

Lenders use a percentage of the expected rental income when calculating how much you can borrow, not the full amount. Most lenders apply 80% of the rental income to allow for periods when the property sits vacant or requires repairs. Some apply as low as 70% depending on your property type and location.

Consider someone looking at a unit near Miranda Fair. The property might rent for $650 per week, which is $33,800 annually. The lender will typically assess $27,040 as usable rental income when calculating serviceability. If you're also working full-time, your salary income is added to that figure, but the property still needs to come close to covering its own costs on an interest-only loan. When calculating investment loan repayments, lenders also apply a buffer rate that's usually 3% above the actual interest rate you'll pay. That means even if your loan is approved at 6.5%, the lender tests whether you can afford repayments at 9.5%. This makes a significant difference to how much you can borrow, particularly if you already have a home loan.

Deposit Requirements and LMI for Investment Loans

You'll need at least a 10% deposit plus costs to buy an investment property, though most lenders prefer 20% to avoid Lenders Mortgage Insurance. If you're using equity from your home in Miranda to fund the deposit, the lender will calculate usable equity based on 80% of your home's value, minus what you owe.

Someone with a home valued at $1,100,000 and an outstanding loan of $450,000 has $880,000 in assessable value at 80% LVR. After deducting the existing loan, that leaves $430,000 in usable equity. From that, you can typically access around 80% without triggering LMI, so roughly $344,000. That's enough to fund a deposit and costs on an investment property up to around $1,500,000 depending on the lender. Keep in mind that releasing equity increases the loan on your home, so your repayments on that property will rise. It's worth running those numbers with someone who can model the full impact before you commit.

Budget Changes to Negative Gearing and Capital Gains Tax

From 1 July 2027, the way losses and capital gains are treated depends on when you bought and what type of property you chose. If you buy an established residential property after 12 May 2026, you'll only be able to claim rental losses against rental income or future capital gains from residential property, not against your salary. Those losses can be carried forward, but they won't reduce your tax bill in the year you incur them unless you have other residential property income to offset.

The 50% capital gains tax discount is also being replaced with an inflation-indexed model and a minimum 30% tax on gains from 1 July 2027. That means if you sell an investment property that was purchased after Budget night, you'll pay tax on real gains after adjusting for inflation, but at least 30% of any gain will be taxed regardless of how long you hold the property. The exception is new builds, where you can choose between the old 50% discount and the new arrangements, whichever works out better for you.

If you already own an investment property, or if you exchanged contracts before Budget night, the old rules still apply to gains and losses that occurred before 1 July 2027. But for anyone buying now, the tax benefit from holding property has shifted. You're relying more on capital growth and less on annual tax deductions to make the investment viable.

Interest-Only Loans and Cash Flow Planning

Most investment loans are written on an interest-only basis for the first five years, which keeps repayments lower and improves cash flow. On a $600,000 loan at a variable rate around 6.5%, interest-only repayments are roughly $3,250 per month. The same loan on principal and interest would be closer to $3,800. That difference matters when you're trying to minimise the gap between rent received and loan costs.

Interest-only doesn't mean you're not building wealth. You're holding the asset while tenants cover most of the cost, and any capital growth accrues to you. After the interest-only period ends, the loan converts to principal and interest unless you apply to extend it. Some lenders will allow one extension, others won't. If your plan depends on refinancing at that point, make sure your borrowing capacity can support it. Serviceability rules may be different in five years, and lenders won't automatically approve an extension if your circumstances have changed.

What Miranda Investors Are Buying and Why

Miranda sits within the Sutherland Shire, and most local investors are either buying within the shire for familiarity or looking slightly further west where yields are higher. Units near the Westfield or along the Kingsway are popular because they're close to transport and retail, which supports rental demand. Vacancy rates in the shire have historically been low, though supply has increased with recent apartment developments around Caringbah and Woolooware.

Some investors are also looking at new builds in growth corridors like Oran Park or Marsden Park, where the new budget provisions around negative gearing and capital gains tax still allow the full 50% CGT discount. That makes those properties more tax-effective from 1 July 2027 compared to buying an established unit in Miranda. Whether that trade-off is worth it depends on your strategy, time frame, and how much weight you put on local knowledge versus tax treatment.

Structuring Loans Across Multiple Properties

If you already own your home and you're adding an investment property, keeping the loans separate is usually the right approach. That means taking out a new loan secured against the investment property, even if you're using equity from your home to fund the deposit. It keeps the debt attached to the asset and makes it clearer what's deductible and what's not.

Some lenders will allow you to secure the investment loan against both properties, which can sometimes improve your rate or LVR position, but it also means the investment debt is tied to your home. If you ever want to sell the investment property and clear that loan, the structure becomes harder to unwind. A mortgage broker in Miranda can help you model different structures and work out what keeps your options open as your portfolio grows.

Loan Features That Matter for Investment Property

An offset account linked to your investment loan doesn't deliver the same tax benefit as it does on your home loan, because the interest you save would have been deductible anyway. If you're holding surplus cash, it's usually placed in an offset against your owner-occupied loan instead, where the interest saved is not deductible and therefore more valuable.

What does matter on an investment loan is the ability to make lump sum repayments without penalty during an interest-only period, and a redraw facility if you want access to any extra repayments you've made. Some lenders restrict redraw on interest-only loans, so if liquidity matters to you, confirm that upfront. You also want the ability to switch between variable and fixed without refinancing, particularly if rates start moving and you want to lock in part of the loan. Not all investment loan products offer that flexibility, and it's not something you can add later.

When Refinancing Makes Sense

If you took out an investment loan more than two years ago, it's worth reviewing your rate and structure. Some lenders have widened the gap between their advertised rates and what existing customers are paying, particularly on investment loans. A loan health check will show you where your current rate sits relative to what's available, and whether refinancing delivers enough of a saving to justify the time and cost involved.

Refinancing also makes sense when your circumstances have changed and the original loan no longer fits. That might be because the interest-only period is ending, you want to access equity for a second investment, or you've paid down enough of the loan that LMI can be removed. The process is similar to your original application, so the lender will reassess your income, expenses, and serviceability as if you were applying for the first time.

Buying investment property now means working within a framework that's shifted. The tax settings are different, the lending rules are tighter, and the margin for error is smaller. But the fundamentals around building wealth through property haven't changed. You still need a deposit, a loan structure that fits your cash flow, and a property that tenants want to live in.

Call one of our team or book an appointment at a time that works for you. We'll model your borrowing capacity, compare lenders based on how they treat rental income, and walk you through what's changed and what that means for your situation.

Frequently Asked Questions