Everything You Need to Know About Investment Unit Loans

Buying an investment unit in Taringa gives you access to steady rental demand from students and professionals near the University of Queensland, but lenders assess apartments differently to houses.

Banks look at body corporate health, rental yield, and apartment size before approving a loan. Some lenders avoid buildings with fewer than six dwellings or apartments under 50 square metres. If you're looking at a studio or one-bedroom unit close to the Toowong village precinct, you'll need to know which lenders will support that property type and what conditions they'll attach. The loan structure you choose, whether variable or fixed, interest only or principal and interest, affects your cash flow and tax position from day one.

What Lenders Look for in an Investment Unit

Lenders assess the building's total floor area, the percentage of owner-occupiers versus investors, and whether the body corporate has a sinking fund in place. They want to see that the property will hold its value and remain saleable if you default. A unit in a well-managed complex with adequate reserves is far more appealing than one in a building with deferred maintenance or a history of special levies.

Consider a buyer purchasing a two-bedroom unit in one of the older walk-up blocks along Morrow Street. The property offers solid rental income, but the body corporate minutes reveal a pending roof replacement with no sinking fund to cover it. Two major lenders declined the application outright. A specialist lender approved the loan but reduced the loan to value ratio to 70% and added a 0.25% rate loading. The buyer needed an additional $40,000 in deposit to proceed. That outcome could have been avoided by reviewing the body corporate records before making an offer.

Deposit Requirements and Loan to Value Ratio

Most lenders cap investment loans at 90% LVR, though some will only lend 80% for units depending on location and building type. If you borrow above 80%, you'll pay Lenders Mortgage Insurance, which protects the lender but not you. LMI premiums for investment purposes are higher than for owner-occupiers and are typically capitalised into the loan amount.

A 10% deposit sounds manageable, but you also need to cover stamp duty, legal fees, building and pest inspections, and lender costs. In Taringa, stamp duty on a $550,000 unit adds roughly $16,000 to your upfront costs. If you're using equity from your existing home rather than cash savings, the lender will assess both properties and may apply different serviceability buffers depending on whether you're refinancing or taking out a new loan. You can explore your refinancing options to release equity without changing your current home loan structure.

Interest Only or Principal and Interest

Interest only investment loans let you reduce your monthly repayment and maximise your claimable expenses, but you're not paying down the loan balance. This can improve cash flow in the early years, particularly if the property is negatively geared. Principal and interest repayments build equity over time, which may help with future borrowing capacity if you're planning portfolio growth.

In Taringa, a typical two-bedroom unit rents for around $550 to $650 per week depending on condition and proximity to the train station. If the property is negatively geared, the shortfall between rental income and all property costs, including loan repayments, body corporate fees, and insurance, can be claimed as a tax deduction under the current negative gearing rules. From 1 July 2027, if you purchased an established unit after 12 May 2026, those losses can only be offset against other residential property income or capital gains, not against your wage income. Excess losses carry forward, so the deduction isn't lost, but the immediate tax benefit changes. New builds retain full negative gearing treatment, which is one reason some investors are shifting focus to newly completed apartment projects in the area.

Variable Rate, Fixed Rate, or a Split

Variable rate investment loans give you flexibility to make extra repayments and access features like offset accounts or redraws, though not all lenders offer offset on investment loans. Fixed rates lock in your repayment for a set period, usually one to five years, which can help with budgeting but may limit your ability to pay down the loan early without incurring break costs.

A split loan lets you fix a portion and keep the rest variable. This approach balances certainty with flexibility. If rates rise, the fixed portion protects part of your repayment. If rates fall, the variable portion benefits immediately. The right mix depends on your income stability, risk tolerance, and how long you plan to hold the property. If you're holding the unit long-term and relying on capital growth, a variable rate gives you more options as your circumstances change. You can compare investment loan options to see how different lenders structure these features.

Rental Income and Serviceability

Lenders typically shade rental income by 20% when calculating your borrowing capacity, meaning they only count 80% of the expected rent. This buffer accounts for vacancy periods, maintenance costs, and the possibility that the tenant may not pay. If the unit rents for $600 per week, the lender will use $480 per week in their assessment.

Vacancy rate in Taringa sits below 2%, which supports consistent rental income, but lenders don't adjust their serviceability shading based on local market conditions. They apply the same 20% reduction regardless of suburb. If you're carrying other debt, such as a car loan or credit card limit, that reduces your borrowing capacity further. Paying down existing liabilities or reducing credit limits before you apply can increase the loan amount you're approved for.

How Capital Gains Tax Changes Affect Your Strategy

From 1 July 2027, capital gains on established residential properties purchased after Budget night will no longer attract the 50% CGT discount. Instead, your cost base will be indexed for inflation, and you'll pay a minimum 30% tax on the gain. If you buy a new apartment in one of the developments currently under construction near the Taringa train station, you'll have the option to choose between the old 50% discount and the new indexed arrangement, whichever is more favourable when you sell.

If you already own an established unit in Taringa and purchased it before 13 May 2026, the changes don't affect any capital gain that accrued up to 1 July 2027. Only growth from that date forward is subject to the new rules. For investors building a portfolio, this shift makes the timing of your purchase and the type of property you choose more relevant than it was previously. Speaking with a tax adviser before you commit to a purchase helps you understand the long-term implications, particularly if you plan to hold multiple properties.

Claimable Expenses and Tax Deductions

You can claim body corporate fees, council rates, insurance, property management fees, and loan interest as deductions against your rental income. Depreciation on fixtures and fittings in newer units can also reduce your taxable income, though the rules around plant and equipment depreciation have tightened in recent years for second-hand properties. A quantity surveyor can prepare a depreciation schedule, which outlines exactly what you can claim and over what period.

Stamp duty and legal fees are not immediately deductible. They form part of your property's cost base, which reduces your capital gain when you sell. Loan establishment fees can be claimed over five years or the life of the loan, whichever is shorter. Keeping accurate records from the start makes tax time simpler and ensures you're not leaving deductions on the table.

Applying for the Loan

The lender will ask for payslips, tax returns, a rental appraisal, and details of the property including the contract of sale and body corporate records. If you're self-employed, expect to provide two years of financials and a letter from your accountant. Some lenders accept one year of tax returns for self-employed borrowers with strong cash flow and a solid credit history, but that's the exception.

Pre-approval gives you a clear borrowing limit before you make an offer, but it's conditional on the property meeting the lender's criteria. A unit that doesn't meet minimum size or building requirements can derail a pre-approval even if your income and deposit are adequate. Working with a broker who knows which lenders will support the property type you're targeting saves time and avoids applications being declined, which can affect your credit file. Noble Lending Group has access to investment loan products from lenders across Australia, including those that specialise in apartments and high-density buildings.

Getting your loan structure right from the outset affects your cash flow, tax position, and ability to borrow again in the future. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions