Your guide to property investment
and financing in Australia
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Why invest in property? | Choosing the right property | Understanding investment loans |
Strategies and risks | Tips
Thinking about investing in property? Whether you're buying your first investment or adding to your portfolio, it’s important to understand how investment property loans could work for you. From choosing the right property to getting the right loan and making smart renovation decisions, this guide brings together practical tips to help you get started and stay on track.
Why invest in property?
Property investment is a popular way to help build wealth in Australia. It can offer:
But it’s not without risks. Property values can change over time, interest rates may rise, and there might be times when your property is vacant. That’s why it’s important to plan ahead and understand what you’re getting into.
Choosing the right property
The property you choose can make a big difference to your investment success. Here are a few things to think about:
Location
Property type
Tenant appeal
Age and condition
Budgeting
It’s also worth thinking about how the property fits into your long-term financial plans. Are you looking for steady rental income, capital growth, or both?
Understanding investment loans
Getting the right loan is just as important as choosing the right property. At Pepper Money, we offer flexible options designed to suit a range of situations, including if you're self-employed or have a unique financial story.
Here’s are some considerations:
The different loan types available
- Fixed rate: Your repayments stay the same for a set period, which can help with budgeting
- Variable rate: Your repayments may change over time, but you’ll often get more flexibility
- Split loan: Combines fixed and variable components of the loan, giving you the best of both worlds.
Repayment options
- Interest-only: You only pay the interest for a set period, which can help with cash flow
- Principal and interest: You pay down the loan and interest together, helping you build equity sooner
Using equity
If you already own a home, you might be able to use some of your equity as a deposit. Equity is the difference between your property’s current value and what you still owe on your mortgage. Lenders generally allow you to access up to 80% of your property’s value, minus your existing loan balance. For example:
- Your home is worth $800,000
- You owe $500,000 on your mortgage
- At 80% loan-to-value ratio, the maximum you could borrow against your property is $640,000 (80% of $800,000)
- Subtract your current loan ($500,000), and your usable equity could be around $140,000.
This amount could help cover your deposit, stamp duty, and other upfront costs – but remember, every application is assessed individually.
Eligibility
Investment strategies and risks
There are different ways to approach property investment, depending on your goals.
Positive gearing
- Your rental income is higher than your expenses.
- You make a profit and may have extra cash flow.
Negative gearing
- Your expenses are higher than your rental income
- You may be able to claim a tax deduction for the loss
Capital gains tax
- If you sell your investment property for a profit, you may need to pay tax on the gain
- Holding the property for more than 12 months could reduce the amount of tax you pay
Building equity
- As your property value increases and you pay down your loan, you build equity
- You can use this equity to fund renovations or buy another property
It’s important to understand the risks too. Interest rates can rise, property values can fall, and rental income isn’t always guaranteed. Having a buffer and a clear plan can help you stay on track.
Renovation and value-add tips
Renovating your investment property can help increase its value and rental appeal, but it’s easy to overspend. Here are some tips to assist you when you are thinking about renovating.
Avoid overcapitalising
- Don’t spend more on renovations than the value they’ll add
- Check local property prices and rental rates before you start
Smart renovation choices
- Focus on kitchens, bathrooms, and flooring – these areas often give the best return
- Think about what your target tenants want (e.g. families might prefer an extra bathroom over luxury finishes)
Budgeting tips
- Set a realistic budget and include a buffer for unexpected costs
- Consider refinancing to help fund the renovation
- Plan for any downtime if the property will be vacant during the works
Final thoughts
Property investment could be a great way to build your financial future, but it’s important to go in with your eyes open. Whether you’re just starting out or ready to take the next step, understanding your options and working with a lender who gets real-life situations can make all the difference.
At Pepper Money, we’re here to help with flexible investment loan solutions, helpful tools, and expert support to guide you through the journey.
Contributor | Vasè Marcevska, Head of Direct Sales – Mortgages and Personal Loans
Vasè has over 16 years of experience in the Banking and Finance sector, specifically within the Third Party and Consumer lending industry. Her expertise now focuses on enhancing our Customer program through a deep understanding of mortgage origination and service excellence across our Financial products.
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Resources to help investors
Our resources are here to guide you through the process and lend a little helping hand to get your investment journey started.
Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
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