Investment Property Checklist

An investment property loan should be assessed as part of your wider borrowing position, not just as finance for one property. The deposit or available equity, expected rental income, existing debts, loan structure and future plans can all affect the application.

This checklist focuses on the lending side of an investment purchase. Tax, financial-planning and property-investment advice should come from appropriately qualified advisers.

1. Clarify the purpose of the investment loan

Before comparing lenders, define what you are buying, how the property will be used and how the borrowing fits your wider plans. The loan structure that suits one investor may not suit another.

For a broader overview, see Investment Property Loans.

2. Check borrowing capacity before making offers

Lenders assess your income, expenses, existing debts, credit position and the proposed investment loan. Expected rental income can support serviceability, but lenders generally use only part of the rent in their calculations and the treatment varies between lenders.

Use the borrowing capacity calculator as an initial guide, then compare lender policy if you are planning a purchase.

3. Understand deposit, equity and LVR

A cash deposit is not the only possible source of funds. If you already own property, usable equity may form part of the funding strategy, subject to valuation, serviceability and lender requirements.

Having equity does not automatically mean you can borrow against all of it. The lender still assesses the total debt, repayments and security position.

4. Allow for purchase and holding costs

Investment-property costs can include transfer duty, conveyancing, inspections, loan costs, property management, insurance, rates, strata fees where applicable, maintenance and periods without rental income.

A stronger application plan considers whether those costs remain manageable if rates, rent or expenses change.

5. Understand how rental income is assessed

There is no universal rental-income percentage used by every lender. Lenders commonly shade expected rent to allow for vacancies and property expenses, and their treatment of existing investment debt can also vary.

This is one reason borrowing capacity can differ significantly between lenders even when the property and applicant are unchanged.

6. Compare principal-and-interest and interest-only repayments

Principal-and-interest repayments reduce the loan balance from the beginning. Interest-only repayments can reduce the required repayment during the interest-only period but do not reduce principal during that period.

The right structure depends on the applicant's cash flow, lender criteria and wider strategy. Tax consequences should be confirmed with an appropriately qualified tax adviser rather than assumed from the loan type.

7. Be careful when mixing private and investment borrowing

The purpose of borrowed funds matters for tax treatment. Using an investment loan or redraw for private spending can create mixed-purpose debt and more complex record keeping.

The ATO distinguishes between borrowing used for income-producing purposes and borrowing used privately. If tax deductibility is part of the decision, get tax advice before changing or redrawing the loan.

8. Choose features because you will use them

Offset accounts, redraw, fixed rates, variable rates and split loans can all be useful in the right circumstances. They should be compared in the context of fees, repayment flexibility and how the loan will actually be managed.

For deeper explanations, the site's loan-feature guides cover offset accounts, redraw facilities and other common loan structures.

9. Consider the next property before choosing this loan

Every new debt affects future serviceability. The lender and structure chosen for one investment property can influence the options available for a later purchase or refinance.

The Property Investment Strategy service focuses on the lending side of that longer-term planning.

10. Prepare the documents lenders commonly request

Requirements vary, but an investment-loan application may involve:

• Identification and income evidence
• Details of existing loans and liabilities
• Bank statements or transaction-history evidence
• Evidence of deposit or available funds
• Property contract information
• Rental appraisal or existing lease information where relevant

What should investors avoid assuming?

• That every lender will use the same amount of rental income
• That a particular deposit percentage is mandatory for every loan
• That interest-only is automatically more tax effective
• That available equity equals available borrowing capacity
• That the lowest advertised rate will produce the best overall result

Can a mortgage broker help with investment finance?

A mortgage broker can help with credit and lending matters such as borrowing capacity, lender comparison and loan structure. Property selection, tax advice and financial planning sit outside that role and should be handled by appropriately qualified professionals.

If you are preparing for an investment purchase, start with the borrowing capacity calculator or explore investment property loan options.