Investment Property Planning: Costs, Cash Flow and Risk
Before you ask how much you can borrow for an investment property, work out how much of your household income you are willing to commit to it. A rental appraisal helps estimate income; a holding budget shows what you may need to contribute each month.
Separate buying costs from ongoing costs
Set aside the deposit, transfer duty, legal and inspection costs first. Then budget for repayments, rates, insurance, management, maintenance, vacancy, body corporate charges and any applicable land tax. Use actual quotes where available. Keep an accessible reserve after settlement. ASIC Moneysmart’s investment property guide explains these costs and the risk of a fall in value.
A worked cash-flow example
Illustration only: assume rent of $650 a week for 50 weeks, annual loan repayments of $36,000 and other annual property expenses of $8,000. These invented budget inputs are not a rental forecast or lending quote.
- Rent received: $650 × 50 = $32,500.
- Repayments and other expenses: $36,000 + $8,000 = $44,000.
- Cash shortfall: $11,500 a year, or about $958 a month, before tax.
A further four weeks without rent and a $3,000 repair would add $5,600 to that year’s shortfall. Could your household cover $17,100 while meeting its other commitments? This cash budget includes all repayments; it is not a calculation of taxable rental profit or loss.
Check the repayment after circumstances change
Use the repayment calculator to compare a proposed loan at different rates. Add rent and property expenses separately; it does not model investment returns or tax. Also test a period of reduced household earnings.
If considering interest-only repayments, request both the initial payment and the payment when principal repayments begin. The debt must then be repaid over the remaining term, which can increase repayments substantially. Compare total interest too. ASIC Moneysmart explains the interest-only trade-offs.
Understand what borrowing against equity commits you to
Equity used for a deposit usually means another borrowing commitment secured against your existing property. Include its repayments in the budget. Ask which property secures each loan, how the lender values it and what happens to the remaining loans if you sell. Westpac’s equity guide explains why equity and borrowing capacity are different.
Property tax changes: check your timing
As at 10 September 2026, the Tax Reform No. 1 Act 2026 has enacted core changes. Treasury’s tax reform summary identifies 1 July 2027 as the start of the main new capital gains tax and negative-gearing arrangements. These include limits on deducting losses from established housing against wages. The negative-gearing changes protect properties held before 7:30pm AEST on 12 May 2026; the capital gains transition operates differently.
Acquisition date, property type and ownership matter. Further detail has been subject to Treasury’s implementation consultation. Ask your registered tax agent to check the applicable rules before signing or changing ownership. Budget without relying on an assumed deduction.
Keep loan purpose and records clear
A private redraw can create a mixed-purpose loan, requiring interest to be apportioned. The ATO’s redraw ruling explains why the use of borrowed funds matters. Keep records and consult your tax agent before moving money. Read our offset and redraw guide for the account differences.
Review the borrowing behind your property plan
Bring your purchase range, deposit or equity estimate and expected monthly contribution. Bradley can discuss lending options using our investment loan checklist. Tax, contract and investment suitability questions need the relevant adviser.
Discuss investment property finance