Smart ways to approach buying an investment unit

Buying a unit as your first investment property

Units often make sense for someone entering the investment property market because they typically require a smaller deposit and lower ongoing maintenance compared to houses. On the Sunshine Coast, you'll find established units in areas like Maroochydore, Caloundra, and Kawana Waters that offer steady rental demand from professionals, downsizers, and relocating families.

Before you speak to a lender, you'll need to show you can service the loan based on rental income and your existing income. Most lenders will assess the rent at around 80% of the market rate to account for vacancies and periods between tenants. They'll also add the cost of body corporate fees, which can range from $3,000 to $8,000 per year depending on the complex, directly into your expense calculation.

Consider someone purchasing a two-bedroom unit near Mooloolaba Beach with body corporate fees of $6,500 annually. The lender won't use the full advertised rent when calculating how much they'll lend. If the unit could rent for $550 per week, the lender applies 80%, so they assess it at $440 per week. That gap matters when you're trying to work out how much you can borrow, especially if you're also servicing a home loan on your own residence.

How the deposit and equity release works

You'll need at least a 10% deposit plus costs to purchase an investment property, though some lenders will go to 90% of the property value if you pay Lenders Mortgage Insurance. If you already own your home and have built up equity, you may be able to use that equity as your deposit rather than needing cash savings.

Equity release involves increasing the loan on your existing home to access funds for the investment purchase. If your home is worth $800,000 and you owe $400,000, you have $400,000 in equity. A lender will typically let you borrow up to 80% of the property value without LMI, so in this case up to $640,000. That gives you $240,000 available to use as a deposit and cover stamp duty, legals, and other purchase costs.

Using equity keeps your cash in reserve and means you're not draining savings accounts. It also means both loans sit against property, which can help with tax planning when you're working with an accountant on investment loan structures.

Interest only versus principal and interest repayments

Most property investors choose interest only repayments for the first few years because it reduces the monthly cost and improves cash flow. You're not paying down the loan balance, just covering the interest charged each month. That makes it easier to hold the property without needing to top up repayments from your own pocket, especially in the early years when rental income might not fully cover all costs.

Interest only periods typically run for one to five years, after which the loan reverts to principal and interest unless you apply to extend it. Some lenders will allow multiple extensions, others are stricter. The trade-off is that you're not reducing the debt, so you'll either need to refinance, sell, or switch to principal and interest down the track.

If you're planning to hold the property long term and build wealth through capital growth rather than paying down debt quickly, interest only can make sense. It also maximises your tax deductions, because every dollar of interest on an investment loan is claimable. Once you start paying down principal, that portion of the repayment isn't deductible.

Variable rate or fixed rate for an investment property

Variable rates give you flexibility to make extra repayments, redraw funds, or refinance without penalty. Fixed rates lock in your repayment for a set period, which can help with budgeting but removes flexibility and can trigger break costs if you need to get out early.

In our experience, most investors on the Sunshine Coast go variable or split the loan, keeping part variable for flexibility and fixing part for certainty. A split structure lets you fix enough to cover your comfort level while leaving room to pay down debt or access redraw if the property needs repairs or you want to reinvest.

If you fix and then decide to sell or refinance before the fixed term ends, you may face break costs. Those costs depend on how much rates have moved since you fixed and how much time is left on the term. For an investment property where your plans might shift based on market conditions or portfolio growth opportunities, keeping at least some portion variable reduces the chance you're locked into a structure that doesn't suit your goals.

What's changed with negative gearing and tax from mid-2026

If you purchased an established unit before 12 May 2026, your tax treatment stays the same. You can still claim the full loss against your salary and other income, and you'll still get the 50% capital gains discount when you sell.

If you're buying an established unit from 13 May 2026 onwards, new rules apply from 1 July 2027. Losses from that property can only be claimed against rental income or capital gains from other residential property, not against your wage. Any unused loss carries forward, so you don't lose the deduction entirely, but it won't reduce your tax bill in the same year unless you have other property income to offset it.

The capital gains discount also changes. Instead of a flat 50% discount, you'll get an inflation-adjusted discount, but with a minimum 30% tax rate on the gain. If you buy a new build, you can choose between the old 50% discount or the new arrangements, whichever works out more favourably.

This doesn't mean investing in property is off the table, but it does shift the focus. Cash flow becomes more important, and properties that generate strong rental income relative to their cost become more attractive than those relying heavily on tax offsets. You'll also want to factor in whether the unit you're considering is in a complex that appeals to long-term tenants, minimising vacancy risk.

Body corporate and claimable expenses

Body corporate fees cover shared building insurance, maintenance of common areas, and management of the complex. They're fully deductible as an investment expense, along with council rates, property management fees, landlord insurance, loan interest, and repairs.

Some buyers avoid units because they see body corporate as wasted money, but if the alternative is a house where you're paying for all maintenance yourself, the numbers often even out. A unit in a well-managed complex on the Sunshine Coast might have higher body corporate fees but lower unexpected repair costs, which can be an advantage when you're managing cash flow.

Keep receipts for everything. Your accountant will want records of all deductible expenses when they prepare your tax return, and the ATO tends to focus on property investors during audits. If you're claiming depreciation on the building or fixtures, you'll also need a quantity surveyor's report, which is a one-off cost but can unlock significant deductions over the first few years.

How lenders assess units differently to houses

Lenders look at the type of unit, the size of the complex, and whether it's in a high-rise or low-rise building. Some lenders won't touch studio apartments or units in complexes with more than a certain number of lots because they're considered higher risk for resale.

If the unit is in a complex with more than 50% non-owner-occupied properties, some lenders will reduce how much they'll lend or decline the application altogether. They'll also check whether the building has any structural issues, cladding problems, or legal disputes that could affect value or saleability.

On the Sunshine Coast, most two-bedroom units in established complexes near the beach or town centres won't trigger these issues, but it's worth checking before you make an offer. A broker can run a property past a few lenders to confirm it meets their criteria before you're committed.

Portfolio growth and refinancing as your equity builds

Once your investment unit increases in value and you've paid down some debt, you build equity in that property too. That equity can then be used to fund a second investment property, creating a cycle of portfolio growth.

Many investors on the Sunshine Coast start with a unit, hold it for a few years while it grows in value and their income increases, then refinance or take out a second loan to buy another property. The rental income from the first property helps service the second loan, and both properties contribute to long-term wealth.

Refinancing can also help if your original loan no longer suits your situation. Rates and loan products shift over time, and a loan health check every couple of years ensures you're not paying more than you need to or missing features that could improve your position.

Call one of our team or book an appointment at a time that works for you. We'll walk through your goals, look at what you can borrow, and help you access investment loan options from banks and lenders across Australia that suit your situation and the type of property you're purchasing.

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