Why Investors Should Build a Property Portfolio on the Coast

Building a second or third investment property feels harder than the first.

You have equity in the existing property, rental income coming in, and the deposit sorted, but every lender applies serviceability rules differently when you already hold investment debt. One bank will approve the loan, another will decline the same application, and the rental income that covers your current property might not be counted at full value for the next one.

Serviceability Tightens With Each Property You Add

Lenders assess your ability to service a new investment loan by adding the new repayment to your existing debts and testing the total at a rate roughly 3 percentage points above the actual rate. Rental income is discounted, usually to 80 per cent of the actual amount, to account for vacancy and holding costs. If you have two properties already, the serviceability buffer applies to all three loans together, and the discount on rental income stacks up quickly. Consider a buyer who owns a unit in Long Jetty generating $550 per week in rent. The lender will assess serviceability using $440 per week, not the full amount. If that buyer now wants to acquire a second property in Bateau Bay, the same discount applies to both rental incomes, and the gap between actual income and assessed income widens. The borrower might be cashflow positive in reality but show a serviceability shortfall on paper.

How Lenders Treat Rental Income Across Multiple Properties

Not all lenders apply the same rental income treatment. Some will accept 80 per cent of market rent, others will use the lower of 80 per cent of market rent or the actual rent stated on the lease. A handful of lenders will shade rental income further if the property is newly settled or if the borrower has limited property investment experience. For investors building a portfolio, this means the choice of lender matters more than the interest rate. In our experience, borrowers switching from a major bank to a regional lender or specialist investor-focused ADI will often pick up an extra $100,000 to $150,000 in borrowing capacity on the same income and deposit, purely because of how rental income is treated in the serviceability calculation.

Another factor is vacancy assumptions. Some lenders will apply a blanket 80 per cent shading regardless of location. Others will adjust the shading based on known vacancy rates in the suburb or property type. Long Jetty and surrounding lakeside suburbs have historically low vacancy periods due to demand from both long-term renters and short-stay holidaymakers, but not all lenders reflect that in their assessment.

Releasing Equity Without Selling Your First Property

Equity is the difference between what your property is worth and what you owe on it. If your Long Jetty unit was purchased a few years ago and has increased in value, you can borrow against that equity to fund the deposit and costs for your next purchase. Lenders will generally allow you to borrow up to 80 per cent of the property's current value without paying Lenders Mortgage Insurance. If the property is worth more than you originally paid and your loan balance has reduced, that gap becomes usable equity.

Consider a buyer who purchased in Long Jetty and now holds a property valued at the current market level with a remaining loan balance of $420,000. At 80 per cent LVR, the maximum borrowing against that property is $480,000, leaving $60,000 in accessible equity. After allowing for refinance costs and a small buffer, that buyer has enough to cover a 10 per cent deposit and settlement costs on a property in the $550,000 to $600,000 range without touching savings. The original property remains tenanted, the loan is restructured to release equity, and the buyer can move directly into the next purchase. That is how portfolio growth happens in practice, not by saving another deposit from scratch.

Interest-Only Loans and Why Investors Use Them

Interest-only repayments reduce the monthly cost of holding an investment property. Instead of paying down principal, the borrower pays only the interest portion of the loan, which lowers the repayment and improves cashflow. For investors holding multiple properties, switching to interest-only on one or more loans can free up enough monthly income to meet serviceability requirements for the next purchase. The loan balance does not reduce during the interest-only period, but the property may still increase in value, and the investor retains the option to make extra repayments voluntarily if cashflow allows.

Interest-only periods are typically offered for up to five years on investment loans, after which the loan reverts to principal and interest unless the borrower applies for an extension or refinances. From a tax perspective, all interest on an investment loan is deductible, whether the loan is interest-only or principal and interest. The structure does not change the deduction, only the repayment amount and the loan balance over time. Investors building a portfolio often use interest-only on properties one and two, then switch property three to principal and interest once the portfolio is established and cashflow improves.

Managing Debt-to-Income Limits Across Multiple Loans

From February, lenders have been required to limit the number of new loans they write to borrowers with a total debt-to-income ratio of six times or more. The limit applies separately to investment lending and owner-occupier lending, and it is measured at the lender level, not the borrower level. If you are applying for your third investment loan and your total debt sits at six times your gross income or higher, you are still eligible for approval, but the lender has less room to approve your application because it counts toward their quarterly cap. In practice, borrowers near the six-times threshold are more likely to face additional serviceability scrutiny or be asked to reduce the loan amount, increase the deposit, or add rental income from another source.

For Long Jetty investors, this does not mean portfolio growth stops at a certain debt level. It means structuring the application carefully and working with a broker who understands which lenders are still comfortably within their quarterly allocation and which are approaching their cap. Timing matters, and so does the order in which you apply. Applying in the first month of a quarter gives you a better chance than applying in the last week, when lenders may have exhausted their allocation.

How Negative Gearing Works and What Changed in May

Negative gearing allows investors to deduct the loss from an investment property against other income, including salary. If your annual interest, rates, insurance and other holding costs exceed your rental income, the difference reduces your taxable income. For properties held before May, or for new builds purchased at any time, that deduction applies in full and continues until you sell. For established properties purchased after May, losses can only be offset against income from other residential investment properties, not against salary or wages, from the income year starting in July next year. Losses that cannot be used in a given year are carried forward and can be used when you sell the property or generate a gain from another residential investment.

This does not stop investors from acquiring multiple properties, but it does change the order in which you buy them. Investors building a portfolio now will often prioritise new builds or properties held in joint names where one party has other residential property income. In practice, many Coast investors are cashflow neutral or positive after the first couple of years anyway, especially with interest-only loans and Long Jetty's low vacancy environment, so the change has less impact than it might in higher-vacancy areas or for buyers stretching serviceability.

Why Structure Matters More Than Rate When You Hold Multiple Loans

Once you hold two or more investment properties, the loan structure becomes more important than the rate. A variable rate loan with an offset account lets you park surplus rental income and reduce interest without locking funds away. A fixed rate loan provides repayment certainty but removes flexibility if you want to access equity again in the next 12 months. Some lenders will allow you to fix a portion of each loan and leave the rest variable, which balances certainty and flexibility. Others will let you split the loan into multiple accounts, each with its own rate and repayment type, so you can tailor the structure to your cashflow and portfolio goals.

Investors on the Coast often hold their first property on a variable rate with offset, their second property on interest-only variable, and their third property on a partial fix with a split loan. That structure keeps serviceability manageable, preserves access to equity, and protects against rate increases on part of the portfolio without locking everything down. The structure is not static. It should be reviewed each time you acquire a new property or release equity, and it should reflect your current income, rental yield, and plans for the next purchase.

Call one of our team or book an appointment at a time that works for you. We will review your existing loans, confirm how much equity you can access, and structure the next loan so it fits within serviceability and supports the property after that.

Frequently Asked Questions