15 June 2026 - 4 min read
Key take-outs
- Be sure to choose the right type of investment property strategy for your financial goals
- Plan carefully and be clear on your financial position and potential borrowing power
- Consider all potential tax implications and seek professional advice where necessary
- Get help understanding the different ways to finance your investment.
Start with a clear picture of your current financial situation and put together a comprehensive plan. Include details of your available deposit and purchase budget – and factor in purchase and ongoing costs, as well as potential tax implications – such as those relating to depreciating assets.
You'll also need to think about the relative benefits of negative gearing versus positive cash flow, and which best reflects your goals and attitude to risk.
Carefully compare the different investment property strategies, such as whether you want to buy and hold indefinitely or have a clear exit date in mind. Might you be interested in ‘flipping' (buying, renovating and selling) – or would building a secondary dwelling at your existing property meet your investment property aspirations for now?
1. Be clear on your investment goals
Investing in property has long been a popular route for Australians hoping to build wealth. It has the potential for capital growth and returns, and is a way to diversify investment portfolios.
But before jumping into the property market, it’s essential to consider your personal circumstances and map out your investment goals. Are you looking for long-term appreciation, immediate rental income returns, or a combination of both? Understanding your objectives from day one will help guide your property selection and overall strategy.
If you’re buying expecting that property prices will go up over time, this is a capital growth strategy that may result in capital gains (the sale price minus what you originally paid and any costs you had to sell it). If you’re investing in properties to rent out or sell later, you’ll likely have to pay Capital Gains Tax in your tax bill on any profits you make.
2. Create a detailed financial plan
When preparing an investment property budget, it’s important to know the costs you’ll be up for, which may include:
- Purchase price
- Any renovation costs
- Property taxes and duties
- Insurance
- Council rates, utilities and strata costs
- Potential maintenance expenses
- Saving for unexpected costs and any unforeseen circumstances – such as gaps in rental income.
Look out for the best property loan interest rates, and the most favourable loan terms, so you pay as little for your investment as possible. You can check out Westpac interest rates here; and, once you have a mortgage, remember to review your loan structure regularly.
3. Use your equity for a deposit
If you already own a home, you may be able to access your equity to help buy your first investment property. Equity is the difference between the value of your property and how much you still owe on your mortgage.
EXAMPLE:
If your house is valued at $900,000 and you still owe $500,000, you have equity of $400,000 that you could potentially access for a deposit on an investment property. Lenders generally allow you to borrow up to 80% of equity value, so you’d have usable equity of $320,000.
Lenders may consider a bigger percentage of usable equity, but you may have to take out Lenders Mortgage Insurance and your interest rates are likely to be higher.
With this strategy, you may be able to go on to buy another investment property with the usable equity you have in both your home and first investment property. This could then be repeated over time to build a property portfolio.
When accessing equity, it’s important to make sure you have enough left over to help if your financial situation changes – or to prevent you being over extended. For example, if interest rates go up, your mortgage repayments may start to outstrip your income.
Find out more about using your equity to invest in property.
4. Make the most of your tax benefits through depreciation
Often, the goal with an investment property is to generate financial returns – usually through rental income as well as capital growth. This makes most of them subject to Capital Gains Tax.
Claiming tax deductions based on depreciation – due to the natural wear and tear on the assets – could reduce your taxable rental income from your property and may lower the amount of tax you have to pay.
It’s essential to understand the tax implications of your investment. Talk to your accountant or tax adviser about how to take advantage of available deductions, depreciation benefits and other tax incentives. Proper tax planning can impact your overall return on investment. For more info, check out our guide to property depreciation for investment properties.
5. Consider a negative gearing strategy
Gearing means that you’ve used a home loan to buy your investment property – and that loan can be either negatively or positively geared.
Negative gearing – which is currently under review and may, in the future, only be available to investments in new builds – is where the amount of rent you get from your tenants for your investment property is less than the interest repayments and other property-related expenses, leading to negative cashflow. Owners may deduct this loss against other income they have, such as salary and wages, which could lead to tax savings. It’s important to talk to your accountant or financial adviser about your best options given your financial circumstances.
6. Consider a positive gearing strategy
Positive gearing is where your rental return is higher than your interest repayments plus all other expenses that are related to the property. These surplus funds equate to positive cash flow, which could provide a passive income.
Making a profit in this way may have tax implications, so again, talk to your accountant or tax adviser about the impacts.
Find out more about negative and positive gearing and rental needs in our beginner’s guide to buying an investment property.
7. Buy and hold but have an exit strategy
As with all investments, it’s important to have an exit strategy for your investment property. Many property investors use a buy and hold strategy where they hold onto the property for as long as possible to make the most of it going up in value over time.
However, there may be a good reason to sell an investment property, including real estate having reached a peak in the market, or the ongoing costs of maintenance are becoming too much.
Consider how long you may want to hold onto it for, and what the triggers might be for you to sell. Before you buy, talk to your accountant or tax adviser about different exit strategies that are appropriate for your situation.
8. Renovate and sell (flipping)
Buying a property to renovate and sell, which is commonly known as 'flipping', is popular with some investors. They hope to quickly increase the property’s value by improving its condition, layout, or appeal to buyers, unlocking hidden value. Additionally, cosmetic upgrades such as painting, new flooring, or a modern kitchen, could deliver high returns relative to cost.
For experienced investors, flipping could potentially generate faster profits than long-term rental strategies while allowing them to reinvest capital into future property projects.
9. Rent to dual occupants
Shared living arrangements are increasingly popular among students, professionals, and smaller households seeking affordability. So, if its structure suits sharing, renting a property to dual occupants could increase rental income compared to leasing to a single household.
By dividing a property into two living spaces or renting separate rooms, you may receive multiple rental streams from one asset, particularly in an area with strong rental demand. Dual occupancy could also reduce vacancy risk due to income continuing despite one tenant moving out.
Alternatively, if your land is big enough, your future development plans could include a subdivision.
10. Create a secondary dwelling
A cost-effective alternative to buying an investment property could be to build a granny flat on your existing land. This could help you avoid the large deposit, stamp duty, and purchase costs associated with buying another property.
A granny flat could generate a steady rental income while increasing the overall value of your home, and they're generally fast and relatively cheap to build when compared with building a new home. Plus, a secondary dwelling could create flexible future living options for family members or downsizing needs.
