How To Buy an Investment Property in Australia 2026

Are you looking to make a property investment in 2026? People tend to have a lot of the same questions:

• What kind of a deposit will I need?
• Are there strategies for property investment?
• What are the steps to getting an investment property, anyway?

If this resonates with you, let's look at how all of that can play into your approach to the property market.

Key takeaways

• There are different ways for an investor to make a deposit on an investment property.
• The size of your deposit may affect your financing.
• Borrowing power and pre-approval policies may impact investing decisions.
• Investors may consider their investment strategy.
• Investment properties have various costs.
• Consider the step-by-step process for buying an investment property.

What deposit do you need for an investment property?

Many people have the idea that a 20% deposit is mandatory to purchase a property. But is that true? There actually may be different options available, depending on your circumstances. Here are some things to consider:

Lenders Mortgage Insurance (LMI)

• LMI is a premium added to a home loan to protect a lender against borrower default.
• Typically, paying a deposit of 20% of the property's purchase price limits the need for LMI. This will depend on the lender's criteria.

Lower deposit options

• LMI may be applied to lower deposits of 10%-15%.
• Some investors may accept LMI to enter the market earlier.

Use equity from an existing property

• You may decide to use the equity in an existing property to fund a deposit.
• This may reduce the amount of upfront cash. This depends on the loan and the lender's requirements.
• This may increase your overall debt.
• Lenders won't typically allow you to access all of your property's equity. You may be able to borrow up to 80% of the property's value to avoid LMI.

Impact of deposit size

The size of your deposit may impact your costs and how lenders assess a potential loan.

Borrowing power

A larger deposit may reduce the required loan. This lowers your loan-to-value ratio (LVR). Some lenders may find that this lowers the borrower's risk, depending on their policies.

Interest rates

A lower LVR may affect the interest rates the lender is willing to offer. However, this will also depend on other factors related to a borrower's financial position. Higher LVRs may result in higher interest rates to protect the lender.

Cash flow

A larger deposit may lead to lower loan repayments. However, this can be affected by the details of the loan. If you put more money towards the deposit, you may have fewer funds to put towards other things.

Disclaimer: This is general information only. It should not be taken as personal advice. Financial advice is only provided by authorised representatives of Lifespan Financial Planning Pty Ltd (AFSL 229892). Credit assistance and lending advice are only provided by FAA Group under its Australian Credit Licence (ACL 388789). You may wish to speak to a registered tax agent for tax advice.

Understanding your borrowing power and pre-approval

Access to the property market be influenced by the amount of money you can borrow.

How borrowing power may affect investors

Borrowing power relates to how much lenders are willing to loan to an investor. They may look at various aspects of your financial situation to determine the risk of lending to you. The kinds of factors that are considered may vary between lenders. Here are some common criteria:

• Lenders may assess how stable and consistent your income is, which could include wages or self-employed earnings.
• Your expenses and any debts could affect lending decisions, including credit card debts or a HECS-HELP loan.
• A lender may want to know about any existing properties, including outstanding loans and repayments, and they may also consider rental income if there is any.

Getting pre-approval before the property search

It's common for investors to get conditional approval for a loan before searching for properties. Some reasons for this include:

• Knowing your budget can be easier with pre-approval, which may give you an indicative borrowing range.
• Your negotiating position may be strengthened in some transactions, as pre-approval can show sellers that the buyer has started enquiring about financing.
• A faster process may be possible when securing pre-approval, helping with early planning, though this can depend on the lender and the property.

Pre-approval doesn't guarantee final approval. The lender may make additional financial checks and assess the property you're considering.

Choosing your investment strategy

There may not be a single strategy that works for every investor. There are a couple of different strategies that a lot of investors consider.

Capital growth

Certain investors may focus on properties for future capital gains. However, they should note that no growth is guaranteed and property values are unpredictable. Characteristics they often look at include:

• Properties may be negatively geared initially, which is when property expenses exceed rental income, and this may be offset by tax deductions depending on the investor's tax position and their compliance with taxation rules.
• A long-term goal is often required, as price growth in the property market may take years to eventuate, if it ever does, and some investors may accept short-term losses, though this may not be suitable for all circumstances.
• A higher purchase price may apply when buying property in high-growth areas, as these can have a higher upfront cost.

Rental yield

Some strategies may prioritise rental returns. This can include characteristics, such as:

• Investors following this path may target a positive net rental yield, looking for positive cash flow in the short term.
• Investors may aim to positively gear their property, though the ability to cover ongoing costs with rental income can be affected by vacancy rates and variable expenses.
• Buyers may seek out properties with a lower purchase price or current market value.

Disclaimer: This is general information only. It should not be taken as personal advice. Financial advice is only provided by authorised representatives of Lifespan Financial Planning Pty Ltd (AFSL 229892). Credit assistance and lending advice are only provided by FAA Group under its Australian Credit Licence (ACL 388789). You may wish to speak to a registered tax agent for tax advice.

Understanding the costs of buying an investment property

An investment property has various costs. Here are some of the expenses you may expect:

• Upfront costs.
  • Stamp duty. This can vary widely by state.
  • Legal advice and conveyancing fees.
  • Building and pest inspections.
  • Loan application fees.
• Ongoing costs.
  • Council rates.
  • Strata fees.
  • Insurance fees.
  • Property management fees.
  • Repairs and maintenance.
  • Interest payments on property investment loans.

Step-by-step process to buy an investment property

Here are basic steps many investors take when approaching the property market:

• Step one. Review your financial position.
• Step two. Think about how different deposit options affect borrowing power and costs.
• Step three. Some buyers may seek pre-approval from a lender.
• Step four. Consider common investment approaches. Seek professional financial advice where appropriate.
• Step five. Research locations with appropriate fundamentals, such as:
  • Tenancy trends.
  • Employment opportunities.
  • Public transport.
  • Vacancy rates.
• Step six. Seek assistance from professionals, such as:
  • Buyer's agent.
  • Accountant.
  • Solicitor.
• Step seven. Do your due diligence with organising inspections and completing market research.
• Step eight. You may decide to make an offer and negotiate purchase terms.
• Step nine. Complete the property settlement. You may then decide if a property manager's support will help.
• Step ten. You may choose to organise new tenants and manage the investment.

Conclusion

Investors consider a lot when looking for a residential property investment. The process may be influenced by your investment goals and financial situation. Are you unsure about the process? A basic guide can show you the steps investors generally take to approach the property market.

Are you seeking a property manager?

The hardest step is often the first. Pick up the phone or send us a message through our enquiry page. The experienced FAA Property team is ready to speak to you about our management services.

Disclaimer: This article contains general information only. It does not consider your personal circumstances and is not personal advice. Financial advice is only provided by authorised representatives of Lifespan Financial Planning Pty Ltd (AFSL 229892). Credit assistance and lending advice are only provided by FAA Group under its Australian Credit Licence (ACL 388789). Past performance does not indicate future returns.