Investment property loans: structure, cash flow and equity

Funding the deposit — cash or equity

Most repeat investors never save another deposit. They release equity from an existing property as a separate split, use that split as the deposit and costs on the next purchase, and keep the loans structurally independent so each property can be sold or refinanced on its own.

Usable equity is generally 80% of the property's value minus what you owe. On a $900,000 home with a $460,000 loan that's roughly $260,000 available before LMI comes into play.

Structure decisions that matter

• Keep the equity release as a separate split, not merged with your home loan
• Avoid cross-securitisation unless there's a specific reason — it limits future flexibility
• Interest only preserves deductible debt and cash flow, at a higher long-run cost
• Pay down non-deductible (home) debt before deductible (investment) debt
• Use an offset against the non-deductible loan, not the investment one

Cash flow before and after tax

Pre-tax cash flow is rent minus interest, rates, insurance, strata, management fees and maintenance. After-tax cash flow adds back the tax benefit of any loss, plus depreciation, which is a deduction that costs you nothing in cash.

A property that looks $180 a week negative before tax can be closer to $60 a week after tax and depreciation on a newer build. That gap is exactly what the investment cash flow calculator quantifies.

How lenders assess investors

• Rental income shaded to 70–80% for vacancy and costs
• Existing investment loans assessed at a buffered rate, even if fixed
• Interest-only periods assessed on the remaining principal-and-interest term
• Higher rates and tighter LVR ceilings than owner-occupied lending
• Portfolio exposure limits with individual lenders once you hold several properties