Your guide to property investment

A long form guide with a lot of practical information on what to consider if you are thinking to buy an investment property

Why You Should Consider Buying an Investment Property

If you're thinking about buying property, you're in good company. Owning property is part of the Australian dream, not just for a place to live but as a key investment. With the value of Australia’s property market soaring to $6.7 trillion, property investment is well ahead of shares and superannuation as the preferred way to build wealth. The past decade has seen housing prices grow by 41.8% nationally, making property an attractive option for both capital growth and rental income.

Who Invests in Property?

Many investors are everyday Australians, often purchasing their first home and then a second property for investment. In 2016, CoreLogic estimated that 2.6 million investor-owned properties were valued at $1.37 trillion across Australia. In fact, about 35% of all residential loans issued in September last year were for investment properties. This shows that Australians have a strong appetite for property investment, especially compared to other countries like the UK, where investment loans make up only 14% of new lending.

Understanding Investment Properties

An investment property is one purchased with the goal of earning a return, either through rental income, appreciation, or both. Generally, any property not used as your main residence is considered an investment property. If you decide to live in it, it becomes an owner-occupied property, and certain tax benefits no longer apply.

Buying an investment property involves similar steps to buying a home, but lenders have stricter criteria and may charge higher interest rates on investment loans. You’ll also need to consider the area and property type carefully to ensure good rental returns or yield.

Financing Your Investment Property

Many investors use the equity in an existing property as a deposit for their next investment, allowing them to avoid paying Lender’s mortgage insurance (LMI) if they can cover at least 20% of the purchase price. LMI protects the lender if you default on the loan, and borrowers who pay less than a 20% deposit generally incur a one-time LMI fee.

When you buy an investment property, you’ll want to be mindful of the tax implications, especially if you live in the property for any period. Doing so may affect your tax deductions on expenses like repairs and maintenance, as it may no longer qualify as an investment property.

Maximizing Tax Deductions

The Australian Tax Office (ATO) allows property investors to claim various expenses, such as:

  • Advertising for tenants
  • Body corporate fees
  • Council rates and water charges
  • Land tax and insurance
  • Maintenance and repairs
  • Legal expenses related to property management

Additionally, purchasing a depreciating asset, like an air conditioner, or undertaking renovations can be tax-deductible if the property is rented or intended for rent.

For those who renovate and sell properties as a business, the profit or loss is treated as income rather than a capital gain. However, renovations on long-held investment properties fall under capital gains tax (CGT) when sold.

Legal and Travel Expenses

Some legal costs aren’t deductible as income but can count toward the property’s cost base for CGT calculations. Travel expenses related to managing your investment property are generally no longer deductible unless you’re operating a property investing business or own an excluded entity, like a corporate tax entity.

Negative Gearing and Positive Cash Flow

Negative gearing occurs when your property’s expenses exceed its rental income. Investors can claim this net loss as a tax deduction, which can be beneficial if the property appreciates over time. Conversely, if your rental income exceeds expenses, you may face tax on this positive cash flow.

Capital Gains Tax (CGT)

When you sell an investment property, CGT applies to any profit made. Holding the property for more than a year allows for a 50% discount on the capital gain. Keeping detailed records of expenses such as stamp duty, professional fees, and renovation costs is essential, as they can reduce your CGT liability.

This general information aims to provide an overview, but always seek professional advice for your specific financial situation.

5 stars for our service reviews from clients

Book Call Now

UNO home loans

November 6, 2024
Try Plans, by UNO
Mortgage calculators completely reimagined
Get Started
Considering a purchase or refinance?

Try Plans by UNO

Mortgage calculators completely reimagined
Get Started
☎️ 🚫 No cold call promise

Related Articles

TESTIMONIALS

What our customers are saying

John Carlo Penaflor
June 24, 2025
5 stars for our service reviews from clients
Amazing service from Scott. Efficient, clear and fast. Got my homeloan refinanced in record time.
Read more
Rebekah Tolmachoff
June 24, 2025
5 stars for our service reviews from clients
We had a fantastic experience working with Paul at Uno. From start to finish, he was professional, attentive, and genuinely cared about us and our situation. He kept in touch throughout the entire process, always keeping us informed and making everything feel simple and stress-free. Nothing was ever too much trouble, and his support made a big difference. Highly recommend Paul to anyone looking for a reliable and caring broker!
Read more
Sally MacKenzie
June 10, 2025
5 stars for our service reviews from clients
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
Read more
Dylan Aubrey
May 31, 2025
5 stars for our service reviews from clients
Jesse did a great job with helping me secure my loan, will be using him again in the future
Read more
Tom Deal
May 30, 2025
5 stars for our service reviews from clients
This is the second time I’ve worked with Mike Parsons, and I wouldn’t go anywhere else for mortgage advice. He’s extremely knowledgeable, responsive, and always happy to help. Mike takes a consultative approach, presenting clear options and making the whole process stress-free. Friendly, professional, and genuinely invested in getting the best outcome. Highly recommend and will definitely use him again!
Read more
ShelleyGawith Functional Nutrition
May 27, 2025
5 stars for our service reviews from clients
Paul was amazing to work with. He went out of his way to help us with every last question. He sorted everything out for us, was a wealth of knowledge in terms of who else to use to support us in the buying process. He made moving from New Zealand so easy. He explained everything to us in an easy to understand way. He really worked for us!!! Plus he's such a lovely funny guy, super approachable. Super responsive, has a great team. Totally took care of us in the whole process. I can't wait to use Paul again and would recommend him to every kiwi moving over and all our aussie friends :)
Read more
Matt Carter
May 21, 2025
5 stars for our service reviews from clients
Paul from Uno has been amazing. Made it so easy! Highly recommend and made the finance process much more enjoyable experience for us.
Read more
Timothy Semsarian
May 17, 2025
5 stars for our service reviews from clients
UNO went above and beyond to help my wife and I with our home loan and settlement. Couldn’t recommend them enough - Jake Wood was an absolute legend! Kept us informed during the whole process and was very thorough with his work, even with a very tight timeframe. Thank you again for all your help, and looking forward to continue using your services!
Read more
Patti Jo Mogensen
May 16, 2025
5 stars for our service reviews from clients
100% Rockstar. We found Paul and Uno Home Loans from recommendations from people who had used his services. We know understand why he comes so highly recommended. We definitely put Paul and his team under pressure due to an oversight our end which meant that he had to don his superman cape and work miracles for us. We didn't appreciate the very very short window we created for ourselves (think less than two weeks for settlement). Paul was able to wave his magic wand, come up with multiple solutions to our situation and make it all happen seamlessly. It goes without saying then, without reservation that we recommend Paul and his team as our trusted mortgage advisor! Thanks again Paul. *****The limoncello is on route we promise :)
Read more
Lani Wards
May 13, 2025
5 stars for our service reviews from clients
Paul Davey worked very hard to get us the mortgage we required for our investment property. He is knowledgeable and approachable. Thanks Paul!
Read more
Michael Badham
May 13, 2025
5 stars for our service reviews from clients
Our entire process with Uno went very well. We had a unique set of requirements for our loan and our super friendly broker Mike Parsons managed to secure us the perfect outcome. Mike also worked above and beyond our expectations to make sure the whole process of completing the documentation of switching banks went smoothly.
Read more
Vanessa Koster
May 13, 2025
5 stars for our service reviews from clients
The service recieved from Paul was fantastic. He made the whole process stress free & easy. We started the process from NZ & Paul had everything ready for approval as soon as we landed in Aus. I would highly recommend Paul if you require a mortgage. You won't be dissapointed.
Read more