Property Investment Timing: What Not to Do Before You Buy

Being loan-ready matters more than picking the perfect month to buy. If you live in Marrickville and are thinking about an investment property, timing is mostly about your tax position, your borrowing power and your loan structure.

Below are the timing mistakes worth avoiding before you sign a contract.

Why Does 12 May 2026 Matter for Negative Gearing?

The date you acquired a residential investment property now affects how you can use a rental loss. Properties held at 7:30pm AEST on 12 May 2026 (including those under contract and awaiting settlement) keep full deductibility of losses against other income, such as your salary, until the property is sold.

For established homes bought after that time, the rules change from the 2027-28 income year. Net rental losses can then only be used against other residential property income, including capital gains on residential property. Unused losses can be carried forward. Properties bought between that date and 30 June 2027 can use the current rules until 30 June 2027 only. Eligible new builds can still deduct losses against all income.

This changes how a loss is used. It does not change whether the interest is deductible. Tax rules are detailed, so speak with your accountant before you decide on a purchase date or property type.

How Much Can You Borrow for an Investment Loan?

Your investment loan amount depends on your income, your debts and how the lender assesses your repayments at a higher rate than the one you will actually pay. Banks and other APRA-regulated lenders must test new borrowers at a rate at least 3.0 percentage points above the loan rate.

Rental income helps, but lenders do not count all of it. APRA expects a minimum 20 per cent haircut, so no more than 80 per cent of expected rent is counted. Lenders also tend to rely less on a rental appraisal than on actual rent received. Credit card limits count as debt too, even if you never use them, so cancelling unused cards before you apply can lift your borrowing power.

If you want a starting number before you look at listings, our borrowing capacity page is a good place to begin.

Using Equity From Your Marrickville Home: What to Check First

You can often use equity in your current home toward an investment deposit, but the lender must approve it and sets its own limits. The main trade-off is more debt, and lenders mortgage insurance (LMI) can apply if your total borrowing goes above 80 per cent of a property's value.

The tax treatment depends on what you use the money for. Interest is deductible based on how the borrowed funds are used, not on which property secures the loan. Money used for a deposit on a rental property is treated differently from money used for a holiday or a car. Keeping those amounts in separate loan splits makes the records much cleaner, and your accountant can confirm how it works for you.

If you are looking at refinancing to release equity, check what your current loan allows before you apply.

Interest Only or Principal and Interest: A Timing Example

Interest-only repayments are lower at the start, but they step up when the interest-only period ends, and they do not increase how much you can borrow. Lenders assess an interest-only loan on the repayments you will face over the remaining years after the interest-only period ends.

This is an illustrative example using a rate of 6.75% p.a. Consider an investor in Sydney's Inner West who borrows $500,000 on a 30-year loan and chooses five years of interest-only. The repayment is about $2,813 a month, because the interest is 6.75% of $500,000 each year, split over 12 months.

When year six arrives, the loan switches to principal and interest over the remaining 25 years. At the same rate, the repayment becomes about $3,455 a month, which is roughly $642 more than before. For comparison, principal and interest from day one over 30 years would be about $3,243 a month.

The investor in this scenario sees the step up coming. They set aside the difference during the interest-only years and ask their broker to review the loan before the switch. The balance has not dropped in five years, so they are borrowing the full $500,000 when the higher repayments start. That is the trade-off for the lower early cost.

Only the interest portion of a repayment is deductible, whichever structure you choose. The principal portion is not. Ask your accountant how this applies to you.

Is It Worth Waiting for a Lower Rate?

Waiting for a lower rate can work, but nobody can reliably predict when rates will move. A purchase you can afford at today's rates is usually a safer plan than one that only works if rates fall.

A more useful test is whether you could handle your repayments if the rate were higher than your loan rate, because lenders use that same approach. Depending on your deposit size and lender, different rates and discounts may be available, so compare more than the headline number. Our investment loans team can walk you through the options from lenders across Australia.

What Changes to Capital Gains Tax Mean for Your Timing

From 1 July 2027, the 50 per cent capital gains tax discount is replaced for affected assets by cost base indexation and a 30 per cent minimum tax rate on real gains accruing from that date. Until then, individuals who hold an asset for more than 12 months can still use the 50 per cent discount on gains accruing before 1 July 2027.

For property owned before that date and sold after it, the gain is split. The earlier portion follows the current rules and the later portion follows the new ones. You can use a market valuation at 1 July 2027 or an ATO formula to work out the split. Eligible new builds can choose between the discount and indexation.

This is a long-term matter, so it is worth getting accounting advice before you commit to a hold period.

Check Your Loan Before You Start Looking

If you already have a home loan, a quick review shows how much equity you have and whether your current rate is holding you back. Our loan health check is a low-pressure way to see where you stand before you make an offer.

Call one of our team or book an appointment at a time that works for you. We will go through your numbers, explain your investment loan options in plain English and help you plan your purchase timing with your accountant.

Frequently Asked Questions