Top 10 Investment Property Types and Loan Features

The property type you choose determines both your borrowing capacity and the loan structure a lender will offer.

Pharmacists looking to acquire rental property often focus on location and rental yield without accounting for how lenders view the asset itself. A lender treats a two-bedroom unit differently to a house on acreage, and that difference shows up in deposit requirements, interest rates, and borrowing limits. If you are working with a tight deposit or relying on equity release from your home, understanding these distinctions before you start searching will save time and avoid disappointment at application stage.

Units and Apartments Under 50 Square Metres

Most lenders apply higher deposit requirements or decline finance for apartments smaller than 50 square metres. The concern is resale liquidity and valuation volatility, particularly in inner-city markets where smaller stock dominates. If you are considering a one-bedroom unit in a high-density building, expect to provide at least 20 per cent deposit, and in some cases lenders will cap the loan to value ratio at 70 per cent regardless of deposit size.

Consider a community pharmacist with $80,000 in equity who wants to purchase a studio apartment listed near a capital city university precinct. Even with sufficient equity, several lenders will decline or restrict the loan amount due to the property size and potential oversupply in the precinct. Refinancing that property later becomes equally difficult, as most lenders maintain the same size restrictions across both purchase and refinance applications.

Townhouses and Terraces on Strata Title

Townhouses and terraces registered under strata or community title are generally treated the same as freehold houses, provided the body corporate is active and building insurance is in place. Lenders assess vacancy risk and maintenance costs, but deposit requirements and interest rates align with standard residential investment lending.

If you are acquiring a two-storey terrace with shared wall provisions, confirm the strata report shows no major defects or outstanding levies. Lenders will order a strata search as part of the valuation process, and any flag related to building compliance or sinking fund deficits can delay settlement or reduce the approved loan amount. This is particularly relevant for older terraces in inner suburbs where building works are common.

Houses on Large Blocks or Acreage

Properties on blocks larger than 2,500 square metres, or those classified as rural residential, often attract loan to value ratio caps of 70 to 80 per cent depending on the lender and location. The reasoning is marketability. Rural properties take longer to sell and attract a smaller buyer pool, which increases risk for the lender in the event of default.

A pharmacist purchasing a four-bedroom house on two hectares outside a regional centre may find their borrowing capacity reduced compared to a similar house on a standard suburban block. Lenders typically require a larger deposit, and some will not lend at all if the property is zoned for primary production or lacks town water and sewerage connection. If you are planning to hold the property long term and can meet the deposit requirement, these properties can offer strong rental demand from families seeking space, but the loan structure will reflect the lender's conservative position.

New Build Dwellings and Negative Gearing Access

From 1 July 2027, only eligible new residential dwellings will allow investors to offset net rental losses against salary income. Eligible properties include dwellings constructed on previously vacant land and dwellings that replace existing properties where the total number of dwellings increases. Knock-down rebuilds that do not increase dwelling numbers are excluded, as are substantial renovations.

If you purchase a newly completed townhouse in a subdivision where vacant land was converted into multiple dwellings, that property qualifies for negative gearing under the new rules. If you purchase a house that was demolished and replaced with a single new house, it does not. The distinction matters because pharmacists in higher marginal tax brackets rely on negative gearing to reduce taxable income during the first years of ownership, when rental income rarely covers loan repayments and holding costs.

New build properties also allow an election between the 50 per cent capital gains tax discount and cost base indexation with a 30 per cent minimum tax rate when you sell. Established properties acquired after 12 May 2026 will be subject to indexation and the minimum tax rate from 1 July 2027, with no discount election available. The tax treatment is material and should inform your property selection, particularly if you plan to sell within ten years.

Established Houses and Apartments Acquired Before 12 May 2026

Properties you already own, or those under contract before 7:30pm AEST on 12 May 2026, continue under existing negative gearing and capital gains tax rules until sold. If you are considering expanding your property portfolio, holding an established property purchased before the grandfathering date can provide ongoing tax benefits while you add new builds to the portfolio.

Established properties generally settle faster than new builds, and you can inspect the actual dwelling rather than rely on plans and finishes schedules. Lenders treat established stock as lower risk for valuation purposes, which can improve your ability to borrow at higher loan to value ratios compared to off-the-plan purchases. The trade-off is access to negative gearing from 1 July 2027 onward, which is quarantined to residential rental income only.

Off-the-Plan Units and Construction Risk

Off-the-plan purchases introduce two risks that affect loan approval. Valuation risk occurs when the completed property is worth less than the contract price, and construction delay risk affects settlement timing and interest rate lock periods. Lenders typically require a 10 per cent deposit at contract and will revalue the property at completion before releasing funds.

If the valuation comes in below the purchase price, you will need to cover the shortfall in cash or accept a smaller loan. For a pharmacist relying on equity release to fund the deposit, a valuation shortfall can derail the entire transaction unless additional savings are available. Some lenders offer off-the-plan products with valuation protection, but these are not universal and often come with higher interest rates or lower loan to value ratio caps.

Construction delays are common, and if your fixed rate expires before settlement, you may face a higher rate environment than the one you locked in. The foreign investment ban on established dwellings, extended to 30 June 2029, has increased demand for new builds from domestic investors, which has placed upward pressure on purchase prices in some precincts. Factor this into your offer price and loan structure before committing.

Properties Requiring Immediate Renovation

Lenders will reduce the loan amount or decline finance for properties requiring structural repairs or where essential services are non-functional. If you are purchasing a dated investment property with the intention to renovate, the lender will value the property in its current state and assess serviceability based on current rental potential, not post-renovation estimates.

If the property is tenanted and habitable, you can typically borrow up to 80 per cent of the purchase price, then use a separate construction or renovation loan to fund the works. If the property is uninhabitable, most lenders will treat it as land value only and cap the loan at 70 per cent or decline altogether. The sequencing matters. Secure the purchase finance first, confirm settlement, then apply for renovation funding either as a top-up or through refinancing.

Dual Occupancy and Granny Flats

Dual occupancy properties, where a single title contains two separate dwellings, are assessed based on whether both dwellings are self-contained and separately rented. If both dwellings have independent access, kitchens, and bathrooms, lenders will combine the rental income from both when calculating serviceability.

A property with a main house and a self-contained granny flat can generate significantly higher rental income than a single dwelling, which improves serviceability and may allow you to borrow more. However, some lenders cap loan to value ratios at 80 per cent for dual occupancy properties due to perceived resale risk. If you are considering a dual occupancy property as your first investment property, confirm the granny flat is council-approved and separately metered for utilities, as informal or unapproved secondary dwellings are typically excluded from rental income calculations.

Properties in Regional and Remote Locations

Lenders maintain postcode-based lending policies that restrict loan to value ratios, decline finance altogether, or require mortgage insurance even at lower loan amounts in locations classified as non-metro or remote. These restrictions are driven by valuation panel limitations, resale timelines, and economic concentration risk.

If you are working in a regional area and considering purchasing local rental property, check lender postcode restrictions before making an offer. Some lenders will lend up to 90 per cent in regional centres with populations above 20,000, while others cap lending at 70 per cent or require a second valuation at the borrower's cost. Rental yields in regional markets are often higher than metro equivalents, but the loan structure may require a larger deposit, which affects your return on equity.

Properties Held in Trust or Company Structures

Loans for properties acquired in a discretionary trust or company name are treated as commercial lending by most banks, even if the property is residential. This means higher interest rates, lower loan to value ratios, and shorter loan terms compared to loans in personal names.

Pharmacists using a trust structure for asset protection or tax planning should factor in the additional borrowing cost and reduced leverage. Some non-bank lenders offer residential investment rates for trust borrowers, but serviceability is assessed on trust income or guarantor income, not personal salary. If you are considering a trust structure, speak to both your accountant and broker before applying, as the loan structure and entity setup need to align.

Call one of our team or book an appointment at a time that works for you. We'll review the property type you are targeting, confirm lender appetite, and structure the loan to match both your deposit position and the way you plan to hold the asset.

Frequently Asked Questions