Last reviewed September 2026 by Megan Birot, Content Editor, OurTop10. Figures checked against the sources named in the article.Update, July 2026: this guide covers the negative gearing and capital gains tax changes legislated after the 2026–27 Federal Budget.
Around one in five Australian taxpayers owns a rental property. Most bought for the same two reasons: rent coming in each month, and a hope the place is worth more in ten years than it is today.
This covers how the numbers work, how the loans are structured, what the July 2027 tax changes do to the maths, and where people come unstuck. If you want someone to structure the finance before you buy, our broker shortlists are below.
Guides and tools in this series
- Negative gearing and the 2026 budget changes, with a weekly-cost calculator
- Rental yield: how to calculate it and what counts as good, with a yield calculator
- Investment property loans: rates, deposits and the servicing test, with a lender-style calculator
- Rentvesting: rent where you live, buy where you can afford, with a rent-vs-buy calculator
- Investment property tax: deductions, depreciation and capital gains, with a CGT estimator
What counts as an investment property
Property you buy to make money from, rather than to live in. The money comes from rent, from the property rising in value, or from both.
Australians have a well-documented habit here. HSBC found we spend twice as much time researching property each week as we spend at the gym. Four things keep the habit going:
- You can stand in front of it. That makes it easier to judge than shares or crypto.
- The tax rules have historically been kind, mainly through negative gearing.
- Values have risen 5.4% a year on average since July 1992, according to CoreLogic.
- Rents and values tend to move with the cost of living, so property holds up reasonably in inflation.
What you gain, and what you risk
On the upside:
- Capital growth. Values have trended up over long periods, particularly where infrastructure and demand are strong. That builds equity you can borrow against later.
- Rent. A steady income that offsets the repayments, and sometimes more.
- Deductions. Interest, management fees, repairs and building depreciation are all claimable. An accountant who works with investors will find more of them than you will — ours are shortlisted in Sydney, Melbourne and Brisbane.
- Spread. Property behaves differently to shares, so it cushions the rest of your portfolio.
On the downside:
- Markets fall. If a downturn lines up with the year you need to sell, you take the loss.
- Vacancies. An empty month is a month you cover the mortgage yourself. In a soft rental patch it can be several.
- Rates move. On an interest-only loan especially, a rate rise lands straight on your budget.
- Holding costs. Rates, insurance, strata, repairs, management fees. They are relentless and easy to underestimate.
Strategy before suburb
Decide what the property is for before you look at a single listing. Growth and yield pull in different directions: the suburbs with the strongest capital growth usually have the weakest rental returns, and the reverse.
If most of your wealth is already in shares, rental income diversifies your cash flow. If your income is stable and you can carry a shortfall, a growth suburb may suit you better.
Austin Rulfs
Financial Services Expert
“Successful property investing starts well before choosing a suburb or property. Investors need to understand what role the asset plays in their broader wealth strategy, whether that’s building long-term capital growth, generating income, or creating financial flexibility. The biggest mistake we see is people buying a property first and trying to make the numbers fit afterwards. The strategy should drive the purchase, not the other way around.”
Austin Rulfs
Director, Zanda Wealth
Working out what you can afford
Then set the budget. A few things to price in:
- Your actual borrowing power, confirmed with a pre-approval rather than an online calculator.
- Purchase costs: the price, stamp duty, legal fees.
- Holding costs: insurance, maintenance, management.
- A buffer for the repair you did not see coming and the rate rise you did.
- What happens to the numbers if your own situation changes.
Revisit it once a year. Budgets set in one rate environment age badly in another.
Financing the purchase
Emmanuel Guignard
Financial Services Expert
“The loan structure behind an investment property can have a significant impact on an investor’s long-term outcome. It’s not just about finding the lowest rate, it’s about understanding cash flow, repayment strategy, borrowing capacity and future investment plans. A well-structured loan should support where the investor wants to be in five or ten years, not just solve today’s purchase.”
Emmanuel Guignard
Director & Principal, Loanscope
Two loan types cover most investor purchases.
Principal and interest. You pay down the balance and the interest together. Repayments are higher, but equity builds from the first month. Suits a long hold.
Interest only. You pay only the interest, usually for three to five years. Repayments are lower and the deductible portion is higher, which is why investors like it. When the period ends, repayments step up sharply and you have paid nothing off the balance. Know that date before you sign.
A broker is worth using if this is your first investment loan. They compare across a lender panel, they know which lenders treat rental income and existing debt generously, and they manage the application. You do not pay them. Our shortlists: Sydney, Melbourne and Brisbane.
Picking the property
Research the market, not the marketing. Prices, rental yields and vacancy rates vary enormously between suburbs and even between streets. Look at population growth, employment and any infrastructure under construction. CoreLogic and RP Data both sell the historical numbers.
Match the property to the tenant. Houses cost more to maintain but attract families and command higher rent. Apartments are cheaper to hold and easier to let, with less land content behind the growth. Neither is better; one of them fits your strategy.
Consider a buyer’s agent. They shortlist, inspect and negotiate. Use one who works on investment purchases rather than owner-occupied homes, because they are judging different things. Ours: Sydney, Melbourne and Brisbane.
The legal and tax side
As a landlord you sit under state tenancy law: agreements, rent increases, bond, notice periods, eviction. Get the conveyancing done properly, and use a property lawyer if the contract has anything unusual in it. Conveyancers: Sydney, Melbourne and Brisbane.
On tax, the ATO allows deductions against rental income for loan interest, maintenance and repairs, management fees, council rates, insurance and building depreciation. If the property runs at a loss, negative gearing has historically let you offset that loss against your salary. That is what changed in May 2026.
What changed on 12 May 2026
The 2026–27 Federal Budget announced the largest change to investor taxation in a generation, and it has since passed as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. The new rules start on 1 July 2027.
Negative gearing is limited to new builds. If you bought an established residential property after 7:30pm AEST on 12 May 2026, rental losses can no longer be offset against your salary. They can only be offset against residential rental income or a capital gain on a rental property, with anything left over carried forward.
Existing investors are grandfathered. If you owned the property, or had it under contract, at 7:30pm AEST on 12 May 2026, the old rules apply until you sell.
New builds keep the concession. Newly built homes and apartments, builds on vacant land, knock-down rebuilds and near-new property occupied for under 12 months before first sale.
The 50% CGT discount goes. For individuals, trusts and partnerships it is replaced by cost-base indexation with a 30% minimum tax rate, applying only to gains accruing after 1 July 2027.
Four things follow from that.
Grandfathered owners lose their status the day they sell, so many will hold. Expect less established stock on the market. Investor demand should tilt towards off-the-plan apartments, house-and-land and rebuilds, which is the point of the policy. First home buyers may meet fewer investors at auctions for established homes, and more competition in the new-build market. And on established property bought after May 2026, a rental shortfall is no longer a tax position. It is just a shortfall. Yield matters more than it did.
Whether you are grandfathered, what you buy next and when you plan to sell all interact here. Model both scenarios with an accountant and a broker before you commit.
Running the property
Your obligations. A safe, compliant, maintained property, repairs handled promptly, and everything under state tenancy law. Keep records of every payment, request and repair. They are what settles a dispute.
Your tenants. Responsive landlords keep tenants longer, and a tenant who stays is worth more than a rent rise. Answer messages. Fix things. Be reasonable about small requests.
Property managers. They charge 5 to 10% of rent to find and screen tenants, collect rent, organise repairs and keep you compliant. If you hold more than one property, or you are investing interstate, it is money well spent.
Getting more out of it
Renovate where tenants look. Kitchens and bathrooms carry the most weight. Paint, lighting and flooring are cheap and change how a place shows.
Maintain on a schedule. Servicing the air conditioning beats replacing it. A tidy property lets faster and lets for more.
Revalue and refinance. If the property has moved in value, a revaluation can free up equity for the next deposit or a renovation, sometimes at a better rate than you are on. See cash-out refinancing.
Other ways in
REITs. You buy a share of a property portfolio, collect the income and never meet a tenant. Cheap to enter, easy to sell, and you have no say in what the trust buys.
Syndicates and crowdfunding. You pool money with other investors to buy into a property you could not buy alone. Profits are split and decisions are collective, which is fine until you disagree with the collective.
Speak with a broker in your area
How much deposit do I need for an investment property?
Most lenders want 20%. Some will go lower with lender’s mortgage insurance added. What you actually get depends on your borrowing power, your credit history and that lender’s policy on rental income.
Does negative gearing still work?
It depends when you bought. If you owned the property, or had it under contract, before 7:30pm AEST on 12 May 2026, nothing changes for you until you sell. For established property bought after that, from 1 July 2027 rental losses can only be offset against rental income or a capital gain on a rental property, not against your salary. New builds keep the old treatment.
Should I use an interest-only loan?
It lifts your cash flow and your deductible interest for three to five years, then repayments jump and you still owe what you borrowed. With negative gearing narrowing on established property, the case for it is weaker than it was. Work out the repayment after the interest-only period ends before you decide.
What can I claim?
Loan interest, maintenance and repairs, management fees, council rates, insurance and depreciation on the building. Keep the receipts and get tax advice specific to your situation.
What is rental yield?
Annual rent as a percentage of what the property cost or is now worth. Gross yield ignores expenses; net yield subtracts maintenance, insurance and management. Net is the number that tells you anything. Our guide to calculating rental yield works through it.
MANSOUR SOLTANI
Mansour has spent more than two decades buying and selling property across Australia, both investment and commercial, in capital cities and regional towns. He runs a finance brokerage overseeing a loan portfolio of more than $250 million, and contributes regularly to money.com.au.