Case study: buying an investment property with no new cash deposit

The situation

A couple in their forties, combined income $216,000, home valued at $1,120,000 with a $642,000 loan. They wanted an investment property but had only $23,000 in accessible savings and assumed they had to keep saving.

Their usable equity at 80% LVR was $254,000 — more than enough.

The challenge

• Keeping the two properties structurally separate, not cross-securitised
• Preserving the deductibility of the investment borrowing
• Servicing two loans at the buffered assessment rate
• Keeping both loans under 80% LVR to avoid LMI on either

What we did

We set up a $154,000 equity release against the home as a separate split — enough for a 20% deposit on the $610,000 purchase ($122,000) plus stamp duty and costs (about $32,000). Investors don't get stamp duty concessions, so this had to be budgeted in full.

The investment property was then financed with a standalone $488,000 loan secured only against that property, with a different lender. No cross-securitisation, so either property can be sold or refinanced independently later.

Rental income of $560 a week was shaded to 80% for servicing, which the lender's assessment comfortably absorbed alongside the existing home loan.

The outcome

• $610,000 investment property purchased with no new cash deposit
• $154,000 equity split funding deposit and all purchase costs
• Home loan and investment loan held with different lenders, uncrossed
• Both securities under 80% LVR — no LMI on either
• Weekly cash flow roughly $190 negative before tax, closer to $70 after tax and depreciation

The structural point

Cross-securitising the two properties would have been simpler for the lender and worse for the clients. Uncrossed, they can sell the investment without renegotiating the home loan, refinance one without touching the other, and release equity again for a third purchase.