Simple hacks to finance an investment apartment

You can borrow to buy an investment apartment, but the amount you'll be approved for depends more on the property itself than it does on your income alone.

Lenders assess apartment purchases differently to houses. They look at body corporate health, vacancy patterns in the building, and the loan to value ratio you're asking for. In Sandringham, where apartment stock includes everything from mid-century walk-ups near the station to newer developments along Bay Road, those differences matter. A lender might offer 80 per cent on a well-managed block with low owner-occupier turnover and cap you at 70 per cent on a building with high investor concentration or incomplete defect repairs.

How lenders assess apartments differently to houses

Lenders apply a separate risk framework to apartments. They want to see a low proportion of investor ownership in the building, completion of any major works, and healthy sinking fund reserves. A two-bedroom apartment near Sandringham Village might be valued at the same price as a similar unit in a neighbouring suburb, but if the body corporate has deferred maintenance or the building is over 60 per cent tenanted, the borrowing capacity can drop by 10 to 20 per cent.

Consider a buyer looking at a unit in a 1980s block close to the beach. The property is well located and the asking price sits below the suburb median, but the body corporate minutes show ongoing water ingress issues and special levies totalling $25,000 over two years. Most lenders will either decline that security or reduce the maximum loan to value ratio to 60 per cent, which means a much larger deposit is needed upfront.

Interest only or principal and interest repayments

You can structure an investment loan as interest only for a set period, typically one to five years, or as principal and interest from the start. Interest only keeps the repayment lower in the early years, which can help if rental income doesn't quite cover the loan cost. Once the interest only period ends, the loan reverts to principal and interest and the repayment increases.

Principal and interest means you're paying down the debt from day one. The repayment is higher, but you build equity faster and the loan becomes cheaper over time. If you're holding the property long term and rental income is strong, principal and interest can work well. If you're planning to sell within a few years or want to maximise short-term cash flow, interest only might suit your strategy.

Variable or fixed rate for an investment apartment

A variable rate moves with the market and gives you flexibility to make extra repayments or refinance without penalty. A fixed rate locks in your repayment for one to five years, but you'll face break costs if you need to exit early and rates have fallen. In our experience, investors with steady rental income and no plans to sell often choose variable because it allows them to adapt if their circumstances change or if they want to access equity later for portfolio growth.

Fixed rates can make sense if you want certainty over your cash flow or if you think rates are about to rise. Just be aware that if the property doesn't perform and you need to sell, or if you want to refinance to a lower rate, the break costs can be significant.

The deposit and borrowing limit

Most lenders will lend up to 80 per cent of the property value for an investment apartment without requiring Lenders Mortgage Insurance. If you borrow more than 80 per cent, LMI is added to the loan and the premium can be several thousand dollars depending on the loan amount and deposit size. Some lenders cap investment lending at 90 per cent, and a handful won't go beyond 80 per cent for apartments at all.

Your deposit needs to include stamp duty and other upfront costs. In Victoria, stamp duty on an investment property is calculated at the standard residential rate, and there's no concession available. If you're buying in Sandringham at a price near the current unit median, stamp duty will add several thousand dollars to your initial outlay, along with conveyancing, building and pest reports, and loan establishment fees.

Tax treatment from July 2027

From 1 July 2027, new rules apply to residential investment properties purchased after 7:30pm AEST on 12 May 2026. If the property is not an eligible new build, any net rental loss must be quarantined. You can carry that loss forward and offset it against future rental income or capital gains from residential property, but you can't use it to reduce your salary or wage income in the same year.

Properties held before that date, or contracted for purchase before that date, continue under the existing negative gearing rules until you sell. Eligible new builds retain full negative gearing, meaning you can still offset losses against other income. For apartments, an eligible new build means a dwelling constructed on previously vacant land or a development that increases the number of dwellings on the site. A knock-down rebuild that replaces one apartment with one apartment doesn't qualify.

If you're comparing an established apartment in Sandringham with a new apartment in a neighbouring suburb, the tax treatment over the life of the loan could shift the numbers. It's worth running the scenarios with your accountant before you commit.

Rental income and serviceability

Lenders assess your ability to service the loan by adding a buffer of three percentage points to the current interest rate and applying that higher figure to your income and expenses. They'll also include an estimate of rental income, but most lenders only count 80 per cent of the advertised rent to account for vacancy periods and management costs. If the apartment you're looking at has a high vacancy rate or sits in a building with several other units listed for lease, the lender may discount the rental income further.

Sandringham apartments near the station and within walking distance of the beach tend to hold tenants well, particularly two-bedroom layouts that appeal to professionals and small families. Buildings further from transport or with limited car parking can experience longer vacancy periods, and that affects both your cash flow and the lender's assessment.

Body corporate and building reports

Every lender will want to see a copy of the body corporate records before they approve the loan. They're looking for the size of the sinking fund, any upcoming special levies, whether major works have been completed, and the proportion of owner-occupiers to investors. A building with a strong sinking fund and mostly owner-occupiers is lower risk. A building with deferred maintenance, high investor concentration, or unresolved defects will either be declined outright or approved at a lower loan to value ratio.

You should also arrange a building and pest inspection even though apartments don't have the same pest risk as houses. The building report will flag structural issues, water damage, and any non-compliant work. If the report comes back with concerns, you can use that information to renegotiate the price or walk away before settlement.

Loan features that suit investors

Look for offset accounts, redraw facilities, and the ability to split your loan between fixed and variable. An offset account linked to your investment loan reduces the interest you pay without affecting your ability to claim the full loan interest as a deduction, provided you keep investment funds separate from personal funds. A redraw facility lets you access any extra repayments you've made, which can be helpful if you need capital for repairs or another investment.

Some investment loan products also allow you to increase the loan amount later without a full reapplication, which is useful if you want to renovate or access equity for a second property. Check the terms carefully, because not all lenders offer this feature and some charge a fee each time you draw down additional funds.

Call one of our team or book an appointment at a time that works for you. We'll walk through your situation, explain what each lender is likely to offer, and help you structure the loan in a way that fits your investment strategy and cash flow.

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