Buying an established rental property in Baldivis starts with securing the right investment loan
Purchasing an established property as an investment gives you rental income from settlement day, but the loan structure you choose affects your cash flow, tax position, and long-term portfolio growth. Interest on borrowings used to acquire or hold residential rental property is deductible against assessable income to the extent the property is rented or held to produce assessable income. Most investors in Baldivis focus on proximity to Stockland Baldivis Shopping Centre, the train station, and schools when selecting a property, knowing tenants value access to transport and amenities. Rental demand in the area remains consistent, with families and young professionals seeking three-bedroom homes close to the freeway.
The loan amount you can access depends on your income, existing debts, and the rental income the property will generate. Lenders assess your capacity to service a home loan, including a residential investment loan, at an interest rate that is at least 3.0 percentage points above the loan product rate. That serviceability buffer means if your investment loan has a rate of 6.5 per cent, the lender tests whether you can afford repayments at 9.5 per cent. Rental income is included, but most lenders only recognise 70 to 80 per cent of it to account for potential vacancies and property management costs.
How much deposit do you need for an established investment property?
Most lenders require a 20 per cent deposit for investment loans. A smaller deposit is possible, but you will pay Lenders Mortgage Insurance if your loan to value ratio exceeds 80 per cent. LMI is generally required by lenders on residential loans where the LVR exceeds 80 per cent. The premium is a cost borne by the borrower and is calculated on a sliding scale based on the loan amount and LVR. For a property in Baldivis, that premium could add several thousand dollars to your upfront costs, depending on the size of your deposit and the property value.
Some investors use equity from their owner-occupied home to fund the deposit rather than drawing down savings. If you own a home in the area and have built sufficient equity, you may be able to leverage that equity to purchase the investment property without needing to save a separate cash deposit. The lender assesses the combined loan to value ratio across both properties and may still require LMI depending on how much you are borrowing overall.
Consider an investor who owns a home in Secret Harbour with $200,000 in available equity. They identify a three-bedroom established property in Baldivis and need $120,000 for a deposit and purchase costs. Rather than selling assets, they refinance their home loan to release the equity, using it as the deposit for the investment property. The rental income from the Baldivis property covers most of the loan repayment, while the interest on both loans remains tax-deductible on the investment portion.
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Interest only or principal and interest repayments?
Investment loans can be structured as interest only for a set period, typically up to five years, or as principal and interest from the start. Interest only repayments are lower each month because you are not reducing the loan balance, which can improve cash flow in the early years of ownership. The trade-off is that you pay more interest over the life of the loan, and the balance does not decrease unless you make additional repayments.
Principal and interest repayments reduce the loan balance with every payment, building equity over time and reducing the total interest paid. Some investors prefer this approach if they plan to hold the property long term or if they want to reduce debt before retirement. Others choose interest only to maximise tax deductions and redirect cash flow into other investments or offsets. Your repayment structure should align with your broader investment strategy and how you plan to build wealth through property.
Variable or fixed interest rates for investment loans?
A variable rate moves with market conditions, which means your repayments can increase or decrease over time. Most variable investment loans include features such as offset accounts, extra repayments, and redraw facilities, giving you flexibility to manage cash flow and reduce interest costs. An offset account linked to your investment loan lets you park surplus cash and reduce the balance on which interest is calculated, without losing access to those funds.
Fixed rates lock in your repayment for a set period, usually between one and five years. This provides certainty, which can help with budgeting, but you lose access to offset accounts and may face break costs if you pay down the loan early or refinance before the fixed term ends. Some investors split their loan between variable and fixed rates to balance certainty with flexibility, particularly if they expect rate movements or plan to access features such as offsets.
What loan features matter for property investors?
An offset account is one of the most useful features for investors managing multiple properties or building a portfolio. Surplus cash sitting in the offset reduces the interest charged on your investment loan, while still allowing you to access those funds when needed. Unlike making extra repayments, funds in an offset are not locked into the loan, which gives you liquidity if an opportunity arises or if you need to cover unexpected costs such as repairs or periods without tenants.
Redraw facilities allow you to access extra repayments you have made on the loan, but some lenders place restrictions on how much you can redraw or charge fees for each transaction. If you plan to make extra repayments with the intention of redrawing later, check the lender's terms before committing. Some investors also look for loan products that allow portability, meaning you can transfer the loan to a different property if you sell and purchase another investment without refinancing.
Tax deductions and holding costs for rental properties
Interest on borrowings used to acquire or hold residential rental property is deductible against assessable income to the extent the property is rented or held to produce assessable income. Other ongoing holding costs, such as council rates, insurance, property management fees, repairs and depreciation, are deductible. For an established property in Baldivis, claimable expenses also include body corporate fees if the property is in a strata scheme, water rates, and marketing costs when advertising for tenants.
Keep records of all expenses from settlement onwards, including loan statements showing interest charges, invoices for repairs and maintenance, and receipts for property management. The interest deduction applies only to the portion of the loan used to purchase or improve the investment property, so if you refinance and use part of the funds for private purposes, you need to separate the deductible and non-deductible portions. Depreciation on fixtures and fittings can also be claimed, though rules around depreciation of second-hand assets have changed in recent years, so speak with an accountant to understand what applies to your property.
Recent changes to negative gearing and capital gains tax
Losses from residential investment properties held at 7:30pm AEST on 12 May 2026, including properties under contract awaiting settlement at that time, continue to be fully deductible against other income, including salary and wages, until the property is sold. Losses from new builds acquired after 12 May 2026 can also continue to be deducted against all income. If you are purchasing an established property now, and that property was not under contract before the cut-off date, different rules apply from the 2027-28 income year onwards.
From the 2027-28 income year, losses related to established residential investment properties acquired after 7:30pm AEST on 12 May 2026 are deductible only against other income from residential properties, including capital gains on residential properties. Excess losses can be carried forward to offset residential property income in future years. This means if your Baldivis rental property generates a loss in a given year, you can use that loss to reduce tax on rental income from other properties or on capital gains when you eventually sell. You cannot offset the loss against your salary or wage income. The change does not affect properties purchased before the cut-off or new builds purchased after it.
Capital gains tax treatment has also changed. From 1 July 2027, the 50 per cent CGT discount for individuals, trusts and partnerships on affected assets is replaced by cost base indexation using CPI and a 30 per cent minimum tax rate on real capital gains accruing from that date. Investors index the cost base of their assets in line with inflation and pay tax on above-inflation profits only. For properties purchased now and sold after 1 July 2027, gains are taxed under the old rules for the portion accruing before that date and under the new indexed rules for the portion accruing after it. These changes affect the after-tax return on your investment and should be part of your decision-making process when purchasing an established property.
Borrowing capacity and debt-to-income limits
From 1 February 2026, each lender may lend up to 20 per cent of new investor loans to borrowers with a total debt-to-income ratio of six times or greater. The limits apply to new lending only. Existing borrowers are not affected. If your total borrowing, including your home loan and the new investment loan, is more than six times your annual income, you may still be able to proceed, but the lender's capacity to approve your application is constrained by this limit. Not every lender has reached the 20 per cent threshold, so if one lender declines your application due to DTI, another may still approve it.
Your borrowing capacity is also affected by other debts such as car loans, personal loans, and credit card limits. Lenders assess credit card limits, not balances, so if you have a card with a $20,000 limit and a zero balance, the lender still assumes you could draw that full amount and includes it in their serviceability calculation. Paying down or closing unused credit facilities before applying for an investment loan can increase the amount you are able to borrow.
Refinancing an existing investment loan
If you already own an investment property and your loan no longer suits your needs, refinancing lets you access a lower rate, switch loan features, or release equity for further purchases. Investors refinance for different reasons, including moving from a fixed rate that has expired to a lower variable rate, consolidating debt, or accessing an offset account that their current loan does not offer.
When refinancing an investment loan, the lender reassesses your serviceability using the same buffer and DTI rules that apply to new borrowers. If your income has increased or your other debts have reduced, you may be able to borrow additional funds as part of the refinance to fund renovations, purchase another property, or cover other investment costs. Keep in mind that refinancing involves discharge fees from your current lender, application fees with the new lender, and potentially valuation and legal costs, so the benefit needs to outweigh those expenses.
What to do before you apply
Before applying for an investment loan, gather your most recent payslips, tax returns, and a rental appraisal for the property you intend to purchase. The rental appraisal should come from a licensed property manager and show the expected weekly rent based on comparable properties in Baldivis. Lenders use this figure to calculate the rental income they will include in their serviceability assessment.
Check your credit file for any errors or unpaid defaults that could affect your application. If you have recently changed jobs, some lenders require a minimum period of employment before they will lend, particularly if you are on probation. Self-employed investors need to provide tax returns and financial statements, and most lenders require at least two years of trading history. If your circumstances are less straightforward, working with a broker gives you access to a wider range of investment loan options and lenders who may be more flexible with employment or income structures.
Call one of our team or book an appointment at a time that works for you. We work with investors across Baldivis and the wider Rockingham region, and we can help you compare loan products, structure your borrowing, and manage the application process from start to finish.
Frequently Asked Questions
How much deposit do I need to buy an established investment property?
Most lenders require a 20 per cent deposit for investment loans. You can borrow with a smaller deposit, but Lenders Mortgage Insurance will apply if your loan to value ratio exceeds 80 per cent, adding to your upfront costs.
Can I still negatively gear an investment property purchased now?
Yes, but the rules have changed. Losses from established properties purchased after 12 May 2026 can only be offset against other residential property income from the 2027-28 income year onwards, not against salary or wages. Losses can be carried forward to future years.
What is the serviceability buffer for investment loans?
Lenders assess your ability to service an investment loan at an interest rate that is at least 3.0 percentage points above the actual loan rate. This buffer ensures you can manage repayments if rates increase.
Should I choose interest only or principal and interest repayments?
Interest only repayments reduce your monthly costs and maximise tax deductions, but you pay more interest over time. Principal and interest repayments reduce your loan balance and build equity faster, which suits long-term investors.
Can I use equity from my home to buy an investment property?
Yes, you can refinance your owner-occupied home to release equity and use it as a deposit for an investment property. The lender assesses the combined loan to value ratio across both properties when determining how much you can borrow.
