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Buying an investment property

Ready, set… invest

Thinking of dipping your toes into the world of real estate investment? It’s a big step, but the rewards can be significant.

However, with a new property come new considerations. From financing to rental income, make sure you have all the information you need before you take the leap. Join us as we guide you through the process of buying an investment property.

liteBlue Variable Rate home loan

Lowest rate. Only the essentials.

myBlue Variable Rate home loan

Great rate. Full features.

myBlue Fixed Rate home loan

Lowest rate. No fees.

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Every great relationship needs someone to make the first move. There are two ways you can get the ball rolling with us and make an application – we can’t wait to hear from you.

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1. Decide what type of investment suits you

Deciding what type of investment is right for you can feel overwhelming, but it doesn’t have to. The key is to think about your personal financial goals, risk tolerance, and investment timeline before making a move.

Here’s a simple way to break it down:

  • Financial goals
    Do you want to grow your wealth, generate passive income, or simply preserve your capital?
  • Risk level
    Are you comfortable taking on higher risk for potentially higher returns, or do you prefer more stability?
  • Investment timeline
    Do you have a long-term outlook or do you need to access your funds sooner?

Answering these questions can help guide you towards the investment type that aligns with your priorities. Then you can start exploring different investment options. For most, the choice is going to be between property and shares. To get you started on your research, we’ve put together a quick list of pros and cons for both.

Property Shares
Increasing value over time through capital growth Receiving a passive income from dividends
Tax benefits and deductions Easy access to money if needed
Income from renting the property out Relatively low entry cost
Aligning an investment with inflation Diversification within your portfolio
Security of being a tangible asset Flexibility of investment options
Opportunities to increase value through renovation

2. Be clear what you want

If investing in property seems like the right move for you, the next step is to decide what your investment strategy will be. Do you want steady rental income or are you chasing big gains down the road?

Nailing down your strategy will help guide you in the right direction. It’ll have an impact on what kind of property you buy, how long you expect to hold onto it, and when you expect to see returns.

Broadly speaking, there are three distinct camps when it comes to property investment:

Capital growth

A capital growth strategy is all about increasing a property’s value over time. This can be done by buying at a low price, fixing it up, or holding onto it a while – all in hopes of a big pay-off later on.

Rental yield

A rental yield strategy focuses on generating a steady and consistent income by investing in properties in high-demand areas and making money by charging market-rate rent.

Tax benefits

A tax benefits strategy involves finding ways to save on taxes, like taking advantage of deductions, depreciation, and tax offsets to lower your taxable income and boost returns.

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Budget planner

Take control of your finances with our budget planning tool.

3. Figure out what you can afford

When it comes to buying property, it can be easy to put all your focus on the deposit. But with investment properties especially, it’s important that you consider the ongoing cost of not just your loan, but also the maintenance of your property.

Some things to think through:

  • What is your income, and how will it be affected by repayments?
    Make sure you can still comfortably cover your living expenses, as well as any other mortgage repayments if you already own property.
  • What is your credit score, and how will it affect your loan?
    This is especially important if your investment isn’t the only property you own, as all your debt will be taken into consideration when assessing your new loan.
  • How will you handle repayments if they increase?
    Many investors choose to take out an ‘interest only’ loan for the first few years, but it’s important you’re able to cover the full cost of repayments further down the line.
  • What other expenses are involved in owning an investment property?
    You’ll need to take into account property management, tenant advertisements, repairs, even renovations if that’s part of your investment strategy.

If you’re a first home buyer, you may be eligible for a range of government incentives. But remember, a lot of these programs are designed for owner occupiers, rather than investors.

Know your borrowing power

What to expect from stamp duty

Calculate your loan repayments

Costs of buying a home

4. Decide how you’ll buy

Feel like you’ve got a good idea of what you’re looking for and what you can afford? That means you’re ready to think about how you’re actually going to buy your investment property.

You’ll want to have at least, 20% deposit ready so you can avoid paying Lender’s Mortgage Insurance. If you’re a first home buyer, that either means saving up or getting a guarantor.

If you already own property, you also have the option of borrowing against the equity you have in your current place – i.e. the amount that would go back into your pocket if you were to sell. If you’ve had your property for a while, chances are you’ll have built up some equity that you could put towards your investment.

What’s my equity?

The first step in calculating your equity is to figure out the market value of your home. You can either do some research yourself, or get an outside opinion through a real estate appraisal. From there, deduct the amount you still owe on your mortgage – your equity is what remains.

5. Sort out pre-approval

Once you’ve figured out what you can afford and sorted out your deposit, it’s time to make a move on the rest of your financing.

Do some research into the kind of home loan you want, then approach a lender for pre-approval – it’ll help you lock down your budget and give you confidence as you head out into the market.

You’ll need to get a bit of information together so they can assess your application:

  • What type of properties you’re looking at
  • Where you’re looking to buy
  • The amount you’re looking to borrow
  • Your salary and income
  • Your general expenses (food, bills, rent, etc.)
  • Your assets (cars, shares, etc.)
  • Your debit (personal loans, credit cards, etc.)

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6. Find the one & snap it up

With your pre-approval in hand, you’re ready to hit the streets. Remember, buying an investment property is very different from buying a home.

When you’re looking for somewhere to live, the process is much more personal and emotional. When you’re buying an investment, it’s all about the numbers. More than ever, you’ll need to do your homework. For example, choosing the right location is especially important with an investment property, as it has a big impact on the potential for capital growth and rental yield.

Think you’ve found the property for you? Fantastic! By now you’ll be in good shape to make an offer or head to that auction. With any luck you’ll have your investment locked down in no time!

Finding a good investment

Property inspection checklist

How to buy at auction

Making an offer & negotiating

7. Choose the right loan for you

Congratulations, you’ve made the jump into property investment! Now it’s time to lock in that loan. Remember, loans for investors can look a little different compared to those for owner occupiers. Which one you go for will depend on your investment game plan.

Here are some things to think about when deciding on what home loan would work for you:

  • Do you want a fixed or variable rate?
    A fixed loan can give you confidence about repayment amounts, while variable rate loans can have more flexible features – or consider a split loan, which can be the best of both.
  • Principal and/or interest payments?
    It’s generally better to repay both your interest and the principal. But if you’re buying an investment or need a little more short-term flexibility, you can choose interest-only repayments.
  • How often do you want to repay?
    The ability to make weekly or fortnightly repayments can help you save on interest long-term. But be careful, some loans will charge an extra fee for this flexibility.

liteBlue Variable Rate home loan

5.99% p.a.^

liteBlue variable rate owner occupied <60% LVR

6.00% p.a.^^

comparison rate

  • Variable rate
  • Fixed rate (1-5 years)
  • $199 application fee
  • No ongoing fees
  • Free unlimited online redraw
  • Additional repayments
  • Top up available
  • Split loan available
  • Construction loan available
  • 30 year maximum loan term

myBlue Fixed Rate home loan

5.79% p.a.^

myBlue 1 year fixed rate owner occupied <60% LVR

6.06% p.a.^^

comparison rate

  • Variable rate
  • Fixed rate (1-5 years)
  • No application fee
  • No ongoing fees
  • Free unlimited online redraw
  • Additional repayments
  • Top up available
  • Split loan available
  • Construction loan available
  • 30 year maximum loan term
  • Up to eight 100% interest offset accounts

myBlue Variable Rate home loan

6.09% p.a.^

myBlue variable rate owner occupied <60% LVR

6.09% p.a.^^

comparison rate

  • Variable rate
  • Fixed rate (1-5 years)
  • No application fee
  • No ongoing fees
  • Free unlimited online redraw
  • Additional repayments
  • Top up available
  • Split loan available
  • Construction loan available
  • 30 year maximum loan term
  • Up to eight 100% interest offset accounts

8. Settle up & manage your investment

When it comes to owning an investment property, it’s not just a matter of signing on the dotted line and calling it a day. There’s a lot of effort that goes into keeping everything running smoothly, especially when it comes to finding the right renters and keeping the property in tip-top shape.

It’s a good idea to think about landlord insurance to protect your property and/or rentable contents. And you’ll need to make sure there’s enough wiggle room in your budget to cover the ongoing expenses of property ownership.

If you’re short on time or live far away, you might want to consider hiring a property manager to take care of things for you. Just keep in mind that these services come with a price tag, usually a percentage of your weekly rental income (anywhere from 3-10% depending on your location).

Sort out landlord insurance

Common home loan questions

Stay on top of interest rates

Costs of home ownership

Find your home with us

Choosing a home loan is personal. We’ve put together a collection of resources to help you make the right choice for you.

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Things you should know

Rates, fees and charges and other information correct as at 15 October 2024 and may change without notice.

Terms, conditions, fees, charges and lending criteria apply.

Please read the Product Disclosure Statement and Fees & Charges and consider whether this product is right for you. Also available in branch or at 1300 004 863.

To view the Target Market Determination for this product, go to Target Market Determinations.

Download a copy of our Owner occupier home loan rates and/or our Investor home loan rates.

Access our Home Loan Key Facts Sheet.

^ Interest rate is only available to owner-occupied loans on liteBlue and myBlue principal and interest repayments with less than or equal to 60% Loan to Value Ratio (LVR). Interest rates for investment loan purposes, interest only loans and other applicable LVR tiers will differ.

^^ Comparison rate based on a secured loan of $150,000 over 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different comparison rate. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.