Buying an investment property is one of the most common ways Australians build wealth. It's also a big financial commitment, and the rules changed significantly in 2026. Here's how to approach your first investment purchase.
Step 1: Set your goal
Ask yourself:
- Are you investing for capital growth, rental income, or both?
- How long do you plan to hold?
- How much risk and cash flow pressure can you handle?
Your answers shape where and what you buy.
Step 2: Understand the 2026 tax changes
From 1 July 2027:
- Negative gearing is limited to new builds for properties bought after 12 May 2026
- The 50% CGT discount is replaced with indexation and a 30% minimum tax for gains accruing after 1 July 2027
That means the tax benefit of buying an established property that runs at a loss is much smaller than before. Cash flow and long-term growth matter more. Read more in negative gearing and CGT changes, and speak to your accountant.
Step 3: Work out your deposit
For investment loans:
- 20% deposit avoids LMI and gives the most lender choice
- 10% deposit is possible with LMI
- Using equity in your home can fund the deposit and costs (see using equity to buy an investment property)
You'll also pay full stamp duty, as investors don't get first home buyer concessions.
Step 4: Check your borrowing power
Lenders usually count 70% to 80% of expected rent as income. They also assess your existing commitments and apply the 3% serviceability buffer. Investment loans often have slightly higher rates than owner-occupier loans.
Step 5: Choose the right loan structure
- Interest-only or principal and interest? IO improves cash flow, while P&I reduces debt. See interest-only vs P&I for investors.
- Keep it separate. Don't cross-collateralise your home and investment.
- Use an offset on your home loan, not your investment loan, to maximise tax-effective savings.
Step 6: Research the market
Look at:
- Rental yields and vacancy rates
- Population and jobs growth
- Infrastructure and amenities
- Supply pipeline (new developments)
- Insurance and climate risks
In 2026, Cotality data shows Perth and many regional markets have outperformed, while Sydney and Melbourne have softened. Past performance isn't a guarantee though.
Step 7: Budget for ongoing costs
- Property management fees (often 5% to 8% of rent plus letting fees)
- Landlord insurance
- Council and water rates
- Strata levies
- Land tax
- Maintenance and repairs
- Vacancy periods
Step 8: Run the cash flow
Example: $650,000 property, 80% loan ($520,000) at 6.79% interest only, rent $600 a week.
- Annual rent: $31,200
- Annual interest: about $35,300
- Other costs: about $8,000
- Pre-tax shortfall: about $12,100 a year
That's roughly $230 a week you'd need to cover. Under the new rules, if this were an established property bought after 12 May 2026, that loss generally couldn't be deducted against your salary from 1 July 2027.
Step 9: Get pre-approval and buy
Once you know your budget, get pre-approval and start inspecting. Use a building and pest inspection and check rental appraisals from local agents.
Frequently asked questions
Should my first property be an investment or a home?
It depends on your goals. Buying an investment first can rule you out of first home buyer concessions later.
Can I use my super to buy an investment property?
Not for a new residential investment. Since 10 August 2026, an SMSF can only use a new limited recourse borrowing arrangement (LRBA) to buy business real property, such as commercial premises used in a business. SMSF loans set up before that date, and refinancing them, are unaffected. See our SMSF lending update.
How much rent do lenders count?
Usually 70% to 80% of the rental appraisal or lease.
Ready to buy your first investment? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654. We'll structure your loans properly from day one.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
