Unlock the Secrets to Owning Multiple Investment Properties

Building a Portfolio Starts With the Right Loan Structure

Owning more than one investment property is not about taking on more debt for the sake of it. It is about structuring your borrowing so each property supports the next, your cashflow remains stable, and you retain enough flexibility to act when the next opportunity appears. The difference between investors who stall after one or two properties and those who build a sustainable portfolio is usually found in how they set up their loans from the start.

Many Mermaid Beach investors begin with a single property, often purchased with equity drawn from their home or an existing asset. That first purchase sets the template for everything that follows. If the loan structure is rigid, or if all available equity is locked into one deal, the second property becomes difficult to fund. If the interest repayment type does not align with your cash position, you may find yourself unable to hold the property through a vacancy or rate increase.

Investment loans used for portfolio growth need to be set up with future borrowing in mind. That means considering how you will access equity again, whether you will use interest-only or principal-and-interest repayments, and how each loan will be assessed when you apply for the next one.

Does Interest-Only Borrowing Still Make Sense for Multiple Properties?

Interest-only repayments lower your monthly outgoings, which can be useful when you are holding multiple properties and relying on rental income to cover costs. At current variable rates, an interest-only loan on a property generating modest rental income may still produce a small negative cashflow each month, but that gap is smaller than it would be under principal-and-interest repayments.

Consider an investor holding two properties in Mermaid Beach, each valued around the current median and each generating rental income that covers around 80 per cent of the interest cost. If both loans were structured as principal and interest, the shortfall each month would require a larger contribution from the investor's salary. Switching one or both loans to interest-only reduces that monthly requirement and preserves cashflow, which becomes important if one property is vacant for a few weeks or if body corporate fees increase.

Interest-only periods are typically approved for five years on standard investment loans. After that period, the loan reverts to principal and interest unless you apply to extend the interest-only term. Lenders will reassess your income and the property's rental performance at that point. Some investors refinance before the reversion to lock in another interest-only period, particularly if they are still acquiring property and want to keep repayments low.

How Lenders Assess Your Borrowing Capacity When You Already Own Investment Property

When you apply for a second or third investment loan, the lender does not just look at your salary. They assess your existing debt, the rental income from properties you already own, and your ability to service all loans at a rate that is at least three percentage points above the actual loan rate. That buffer is set by the regulator and applies to all new borrowing from banks and credit unions.

Rental income is not counted dollar for dollar. Most lenders apply a shading rate, which means they only count 75 to 80 per cent of the gross rent when calculating your serviceability. If your property generates $800 per week in rent, the lender may only recognise $600 to $640 of that income. If the property has been vacant or if you cannot provide a lease agreement, some lenders will not count the rental income at all.

From February this year, lenders have also been required to limit the proportion of new loans they write to borrowers with a debt-to-income ratio of six times or more. That limit applies separately to investor loans and owner-occupier loans, and it affects how much you can borrow once your total debt reaches a certain level relative to your income. If you are close to that threshold, your borrowing capacity may be capped even if your rental income and deposit are strong.

Using Equity to Fund Your Next Purchase Without Selling

Equity is the difference between what your property is worth and what you owe on it. As your properties increase in value or as you pay down the loan, that equity grows. You can borrow against it to fund the deposit and purchase costs for your next investment property without needing to sell anything or draw heavily on your cash savings.

Most lenders will allow you to borrow up to 80 per cent of a property's value without requiring lenders mortgage insurance. If your property is worth $900,000 and you owe $500,000, you have $400,000 in equity. Borrowing up to 80 per cent of the property's value means you could access up to $220,000 of that equity, which could cover the deposit and costs for another property purchase.

Accessing equity involves either refinancing your existing loan or taking out a separate loan secured against the same property. The new borrowing is assessed on your current income and serviceability, so if your circumstances have changed since you took out the original loan, the amount you can access may be lower than the available equity suggests. Refinancing to access equity also resets your loan term unless you specifically request otherwise, which can extend the total time you are paying interest.

Should You Fix the Rate on Investment Loans or Stay Variable?

Fixed rates give you certainty over repayments for a set period, usually between one and five years. Variable rates move with the market and give you access to offset accounts and the ability to make extra repayments without penalty. Both have a role in a multi-property portfolio, and many investors use a mix.

If you fix the rate on an investment loan and rates fall, you are locked in at the higher rate. If you need to sell the property or refinance before the fixed term ends, you may be charged break costs, which can run into the thousands depending on how much rates have moved. If you are planning to hold the property long term and want stable repayments, a fixed rate can work. If you expect to refinance within a couple of years to access more equity or to move to another lender, a variable rate is usually more practical.

Variable rate loans also allow you to link an offset account, which can reduce the interest you pay if you keep savings or rental income in that account. The balance in the offset is subtracted from your loan balance when interest is calculated, so a higher offset balance means lower monthly interest charges. That can be useful if you are managing cashflow across multiple properties and want to reduce costs without formally paying down the loan.

What Happens to Your Portfolio When Negative Gearing Rules Change

From the 2027-28 income year, losses on established investment properties purchased after May last year can only be offset against income from other residential properties, not against your salary. Properties you already owned at that date, and new builds, are not affected by the change. If you are holding properties bought before that date, you can still deduct the full loss against your wage income as you do now.

For investors building a portfolio today, that means any established property you purchase now will have restricted deductibility from next financial year. If the property runs at a loss, you can carry that loss forward and use it to offset future rental income or capital gains on residential property, but you will not get the immediate tax benefit against your salary.

New builds are exempt from the restriction, so if you are buying a newly constructed property or a property where the number of dwellings has increased, you retain full negative gearing regardless of when you buy. That exemption is intended to encourage investment in housing supply, and it may shift the focus for some investors toward new developments rather than established stock.

Structuring Loans Separately or Cross-Collateralising Properties

When you own multiple properties, you can either keep each loan separate with its own security, or you can cross-collateralise by using multiple properties as security for a single loan or loan package. Cross-collateralisation can make it easier to borrow initially because the lender sees lower risk, but it also means you cannot sell or refinance one property without the lender's consent across the whole package.

Keeping loans separate gives you more control. If you want to sell one property, you deal with that loan only. If you want to refinance to a different lender for a lower rate or to access equity, you can do so without needing to move all your loans at once. Separate loans also make it clearer which property is performing and which is not, because the income and expenses are not blended.

Cross-collateralisation is sometimes unavoidable if you need to borrow at a high loan-to-value ratio or if your serviceability is tight. Some lenders will not approve a loan above 80 per cent without additional security. If you do cross-collateralise, it is worth reviewing the arrangement once your equity position improves, so you can split the securities and regain flexibility.

Managing Cashflow and Vacancy Across Multiple Investment Properties

Holding multiple investment properties means managing multiple rent payments, multiple expense cycles, and the occasional vacancy. Mermaid Beach has a relatively low vacancy rate compared to many other Gold Coast suburbs, but that does not mean every property will be tenanted every week of the year. A two-week gap between tenants can cost you $1,600 in lost rent on a property leasing at $800 per week, and you still need to cover the loan repayment, body corporate fees, and insurance during that period.

Setting aside a cash buffer equal to at least three months of holding costs for each property gives you room to cover a vacancy, an unexpected repair, or a rate increase without needing to dip into offset accounts or personal savings earmarked for other purposes. Some investors keep this buffer in an offset account linked to one of their investment loans, so it is reducing interest while still being accessible.

If you are using interest-only loans and rental income to cover most of your holding costs, a vacancy can turn a breakeven property into a loss-making one very quickly. That is where loan structuring and serviceability planning overlap. If your total debt serviceability is already tight, a single vacancy may push you into hardship. If you have structured your loans conservatively and kept your total borrowing below the maximum the lender would approve, you have more breathing room.

Call one of our team or book an appointment at a time that works for you to discuss how your current loan structure supports or limits your next purchase, and what changes might make sense before you go looking for property number two or three.

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