Updated October 2026 · General information only. Tax rules are changing, so read the "2026 Budget changes" section carefully.
Everyone has a cousin who "made a fortune in property" and a barbecue theory about how easy it is. Reality is a little less glamorous: spreadsheets, loan assessments and a tenant named Kevin who "definitely told you" about the dishwasher. If you're thinking of buying your first investment property, here's a calm, practical roadmap.
Step 0: Decide why you're investing
Investment strategies pull in different directions:
- Growth-first: you accept lower rent (and often negative cash flow) in exchange for expected long-term capital growth. Usually a 7–10+ year plan.
- Yield-first: you want the property to largely pay for itself, with positive or neutral cash flow.
- A mix: common for first-timers.
Write down how many months of negative cash flow you could handle without stress. If your answer is "zero," that's valuable information.
The 2026 Budget changes you must know about
In the Federal Budget on 12 May 2026, the Government announced changes affecting property investors. Based on the Budget papers and Treasury's summary:
- From 1 July 2027, negative gearing of residential property will be limited to new builds.
- Grandfathering: properties held (or under contract) at 7:30pm AEST on 12 May 2026 keep the existing treatment.
- Established homes bought after the announcement: investors can still deduct rental losses against other residential property income (including capital gains) and carry forward excess losses, but cannot deduct those losses against wages and other non-property income from 1 July 2027.
- New builds can continue to be negatively geared, with a choice on capital gains tax treatment.
- Capital gains tax: for gains accruing from 1 July 2027, the 50% CGT discount is replaced by cost-base indexation with a 30% minimum tax rate (investors in new builds can choose between the old discount and the new system).
Sources differ on whether the legislation has fully passed Parliament, and definitions (such as what counts as a "new build") matter a lot. Check Treasury, the ATO and your accountant for the current position before you buy. Some lenders have also changed how they treat negative gearing benefits in borrowing-power calculations.
The sensible order: borrowing power, broker, then property
- Know your borrowing power. Investors are assessed under APRA's rules, including the 3 percentage point serviceability buffer and the debt-to-income limit (banks can only lend up to 20% of new loans at six times income or more). Rental income is usually counted at a discount (often around 70–80%).
- Work out your deposit. Investment loans typically need 10–20%, and LMI for investors can cost noticeably more than for owner-occupiers. Some investors use equity in their existing home as a deposit, which increases debt and risk.
- Speak to a broker before you inspect, because loan structure matters (more below).
- Choose the property type and market, then do due diligence.
- Pre-approval, offer, contract, finance and settlement.
- Set up management, insurance and tax records on day one.
How much cash do you need?
One industry guide estimates you may need roughly $70,000 to $130,000 in cash to buy a $500,000 investment property, depending on deposit size and state. That covers the deposit (10–20%), stamp duty (no first-home-buyer exemption for investment purchases), conveyancing, inspections and loan costs. Add a buffer for vacancy and repairs; many investors keep several months of holding costs in reserve.
Know your numbers
- Gross rental yield = annual rent ÷ purchase price. One guide suggests 4.5% gross is a reasonable starting point for a first property, but it varies by market.
- Net yield subtracts rates, insurance, management fees, strata and maintenance.
- Cash flow = rent minus all costs, including loan interest. Many investors are cash-flow negative, sometimes by design.
- Interest-only vs principal-and-interest: interest-only reduces repayments and maximises the interest deduction in the short term, but you aren't paying down the debt. Interest-only periods eventually end and rates can be higher.
Tax basics from the ATO
- Rental income is taxable.
- You can generally deduct interest on the loan (not the principal repayments), council rates, insurance, property management fees, repairs and maintenance, and depreciation on eligible assets and building works.
- You can claim only for the period the property is rented or genuinely available for rent.
- Purchase and sale costs (like stamp duty) are generally capital costs, not annual deductions, though they affect your CGT cost base.
- Rent a property to family or friends below market rate and deductions may be limited.
- A quantity surveyor's depreciation schedule can be a worthwhile cost.
- Keep every receipt and record. The ATO actively reviews rental deductions.
Due diligence: what to check
- Rental demand and vacancy rates in the suburb, and evidence of rents for comparable properties (ask a property manager for an appraisal)
- Capital growth drivers: population, infrastructure, employment, supply
- Property type: house, unit, townhouse or new build, and the tax treatment of each under the new rules
- Strata/owners corporation health for apartments: levies, sinking fund, planned works
- Building and pest inspection, plus a Section 32 review by a conveyancer
- Insurance: landlord insurance and building insurance
- Exit options: could you sell it easily? Who is the likely buyer?
Checklist: first investment property
- Define my goal (growth, yield or both) and time horizon
- Get independent tax advice about the 2026 Budget changes and my situation
- Confirm my borrowing power and deposit with a broker
- Decide new build vs established with the new tax rules in mind
- Budget for stamp duty, legal costs, inspections, loan fees and LMI
- Keep a cash buffer (vacancy, repairs, rate rises)
- Stress-test my loan at higher interest rates and a vacancy period
- Get a rental appraisal from a property manager
- Order building and pest inspection and a conveyancer review of the contract and Section 32
- Arrange landlord insurance before settlement
- Choose a reputable property manager
- Order a depreciation schedule (new builds especially)
- Set up a record-keeping system for the ATO
- Decide ownership structure (personal, joint, trust) with advice
A light-hearted warning
Property investing has one golden rule: buy the property that makes sense on paper, not the one with the pretty kitchen. Kitchens don't pay rent. (Well, tenants do, but they prefer the kitchen to work.)
Official links
- Federal Budget 2026–27, tax reform: https://budget.gov.au/content/04-tax-reform.htm
- Treasury, Budget 2026–27 tax system changes: https://treasury.gov.au/policy-topics/taxation/budget2026-27
- ATO, residential rental properties: https://www.ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties
- APRA, macroprudential policy settings: https://www.apra.gov.au
- MoneySmart (ASIC), investing in property: https://moneysmart.gov.au
- State Revenue Office Victoria, duty and land tax: https://www.sro.vic.gov.au
Disclosure and Disclaimer
This article is general information only and is not financial, credit, legal, tax or investment advice. It does not consider your objectives, financial situation or needs. Property investment involves risk, including loss of capital. Tax law is changing, and the 2026 Budget measures may be amended or may not yet be law. Please do your own research and obtain independent advice from a licensed financial adviser, mortgage broker, registered tax agent or accountant and conveyancer or solicitor before making any decision. Loan approvals are subject to lender criteria. To the maximum extent permitted by law, our business, its directors, employees and brokers accept no liability for any loss or damage arising from reliance on this article.
Disclaimer: The information in this article is general in nature and does not constitute personal financial or credit advice. Speak with Amber Finance so we can look at your own situation in detail.