can set you up for long-term success. Shern Advisory Finance Brokers simplifies your journey to increase rental income, reduce taxable income with negative gearing, and benefit from rising property values.
Whether you're a
or planning to buy your next property, our home loan experts will guide you through the entire journey. Invest smarter, maximise returns, and stay ahead of the game.
is meant to help you purchase an asset, typically property, to earn money. You can make money in two main ways:
Investment property loans are different from regular home loans. They often have:
In short, an investment loan allows you to build wealth through property instead of merely owning a home to live in.
Investing in Melbourne: What Makes It a Consideration for Property Buyers
Buying an
investment property in Melbourne is more than just a smart move—it’s a strategic step toward long-term financial growth. With strong fundamentals and consistent demand, the Melbourne property market continues to attract savvy property investors across Australia.
Here’s why it’s a prime location for your next investment:
Steady Population Growth
Melbourne’s rapidly expanding population increases the demand for housing every year. This strong growth supports both short- and long-term rental yield potential—making it easier to meet interest repayments while maintaining steady cash flow.
Economic Strength & Stability
A diverse economy driven by healthcare, education, and tech makes Melbourne one of the most stable markets for real estate. This economic resilience helps you meet lending criteria and secure easier credit approval from home loan specialists.
High Rental Demand
Melbourne’s rental market remains strong, offering excellent rental income opportunities. Whether you're focusing on only payments or preparing for loan approval, positive cash flow can support your overall investment strategy.
Proven Capital Growth
Over time, property values in Melbourne have shown reliable upward trends. That means the longer you hold the property, the more likely you are to benefit from capital gains—especially if paired with the right fixed rate home loan or variable interest rate structure.
But What Are the Risks of Staying Local?
While Melbourne remains a solid investment choice, focusing solely on one city—or even just one market—can limit your long-term potential.
Here’s what to consider if you're only investing in Melbourne:
Rising Entry Costs
As Melbourne grows in popularity, so do property prices. This can make it harder to find high-performing, positively geared properties, especially if you're aiming to build a portfolio over time.
Lower Rental Yields in Some Suburbs
Inner-city and blue-chip areas often offer lower yields, which can affect your cash flow—particularly if interest rates rise or you’re relying on rental income to support your strategy.
Increased Competition
More investors are eyeing the Melbourne market, leading to fiercer competition for well-located properties. That can make it tougher to negotiate and potentially drive prices beyond fair value.
Exposure to a Single Market Cycle
By concentrating your portfolio in one city, you're more vulnerable to localised market fluctuations, changes in government policy, or economic shifts specific to Victoria.
Investing Interstate: Opportunities Beyond the Melbourne Market
Investing in Melbourne has its perks—but what if expanding beyond your home state could open the door to even greater opportunities? More and more Melbourne-based investors are looking interstate to diversify their portfolios, boost cash flow, and tap into rising markets in Queensland, Western Australia, and New South Wales.
Here’s what you need to know about investing beyond Victoria:
Brisbane & Greater Queensland
The Pro’s:
Brisbane has emerged as a favourite for Melbourne investors chasing affordable entry points and higher rental yields. With strong population growth, major infrastructure projects (like the Brisbane Metro and 2032 Olympics developments), and a relatively low median house price compared to Melbourne, the Sunshine State offers solid growth potential—especially in outer-metro areas and regional hubs like the Gold Coast and Sunshine Coast.
The Con’s:
Queensland’s market can be more sensitive to investor trends, with pockets of volatility. Understanding local council regulations, zoning, and flood-prone areas is crucial before making a move. Rental laws also differ, so factor in landlord rights and tenancy agreements.
Expert Insight:
Targeting growth corridors just outside Brisbane—like Logan, Moreton Bay, and Ipswich—can offer the best mix of capital growth and cash flow. Always research local job drivers and vacancy rates before diving in.
Perth & Regional WA
The Pro’s:
Perth’s market is rising from a long downturn, with low vacancy rates, strong mining-driven employment, and relatively low purchase prices. For Melbourne investors, it’s a chance to secure a positively geared property in a market with strong upside potential.
The Con’s:
Western Australia’s market has traditionally been more cyclical, closely tied to resources and global demand. That means timing matters—a lot. You’ll also need to consider the impact of distance on property management and maintenance if you’re self-managing or relying on local trades.
Expert Insight:
Focus on suburbs with rising population growth and infrastructure spend—like Baldivis, Alkimos, or parts of Rockingham. Partnering with a reputable local property manager is a must when investing so far from home.
Sydney & Broader NSW
The Pro’s:
Sydney is Australia’s most established property market, offering blue-chip investment appeal and long-term capital growth. For Melbourne investors who can afford the higher entry point, Sydney’s inner and middle-ring suburbs can deliver strong growth—especially when paired with renovations or development potential.
The Con’s:
High property prices mean lower rental yields and greater holding costs. Plus, strict zoning and building regulations can limit options if you’re chasing development upside or dual-income setups.
Expert Insight:
Look beyond the city—regional hotspots like Newcastle, the Central Coast, and Wollongong are increasingly popular with both renters and buyers. These areas offer lower prices, lifestyle appeal, and growing commuter infrastructure.
What Types of Investment Home Loans Are Available?
Choosing the right investment home loan starts with understanding your options. Each loan type comes with different benefits, depending on your goals, loan amount, and how you want to manage your monthly repayments. Here’s a quick breakdown of the most common options:
Interest-Only Loans
For the initial interest period—typically 5 to 10 years—you’ll only pay the interest, not the principal. This keeps monthly repayments lower at the start, freeing up cash flow for other investments. However, your loan balance won’t reduce during this time.
Principal and Interest Loans
With this option, you pay down both the amount borrowed and the interest repayments. While your repayments are higher, you’ll steadily reduce your loan amount and build equity faster over time.
Fixed-Rate Loans
Lock in your interest rate for a fixed rate period—usually 1 to 5 years. This gives you predictability, helping you manage your home loan account without surprises. Great for those who want stability and want to avoid early repayment fees.
Variable-Rate Loans
A flexible option where your rate adjusts with the market. If rates drop, you could pay more interest toward your principal—but if they rise, your monthly repayments may increase. Ideal if you want more control and the ability to make extra repayments without penalties.
If you own an existing property, you may be able to unlock its value by borrowing against your equity. This can help fund your next purchase without needing to save for a full deposit.
Each option comes with different risks and benefits, and the best fit depends on your financial goals and repayment strategy. Need help comparing loans or calculating the comparison rate? Our team is here to guide you through it.
What Are the Eligibility Requirements for an Investment Loan?
To get approved for an investment loan, lenders will carefully check your financial situation to ensure you can make the repayments. Here’s what they typically check:
- Credit Score: A good credit score shows you’ve been responsible withpaying off debts in the past, which makes lenders feel confident that you’ll pay back the loan.
- Income: Your income needs to be enough to cover your loan payments, especially if you have other debts. Lenders will also consider any rental income you expect to receive from the property.
- Deposit: Most lenders ask for a 20% deposit, but some will accept less if you meet other requirements. Just keep in mind that a smaller deposit might mean extra costs, like Lenders Mortgage Insurance (LMI).
- Rental Income Potential: If you’re buying a property to rent out, lenders will look at how much rent you can expect to earn. They may use this to decide how much they’re willing to lend you.
Meeting these criteria can boost your chances of getting approved for a loan, and the stronger your finances are, the better the loan terms you may receive. If you’d like expert help navigating these requirements and finding the right loan for your needs, don’t hesitate to reach out for support.
How Can You Maximise Your Borrowing Power for an Investment Loan?
If you want to borrow more, you’ll need to maximise your borrowing power. Here’s how you can do it:
- Reduce Personal Debt: Pay off things like credit cards, personal loans, or car loans. The less debt you have, the more likely a lender will approve a larger loan.
- Increase Your Savings: A larger deposit (more than 20%) reduces the risk for lenders and increases your chances of getting a better deal.
- Boost Your Credit Score: Make sure you pay all your bills on time, and try not to take on new debts before applying for the loan.
- Leverage Rental Income: If you’re buying a rental property, use projected rental income to show lenders that you can afford the loan repayments.
These steps can help you secure the loan amount you need to achieve your property investment goals in Melbourne. If you’re unsure where to start or need guidance on which strategy best fits your situation, our team is here to provide personalised advice and support at any stage of the process.
What Are the Usage and Loan Percentages for Investment Loans?
Investment loans offer flexibility and can be used for several purposes:
Buying a Property to Rent Out
One of the most popular reasons to take out an investment loan is to purchase a rental property. By renting it out, you generate rental income, which can help cover your loan repayments and other property expenses. Over time, if the property value increases, you may also be able to sell it for a profit. This dual benefit—rental income and capital growth—makes property investment an attractive option, especially in a market like Melbourne, where demand for rentals is strong.
Renovating
Investment loans can also be used to fund renovations or improvements to an existing property. Renovating your property can increase its value, allowing you to sell it for more or charge higher rent. Whether you’re updating the kitchen, adding a new room, or modernising the interior, these improvements not only attract better tenants but also boost your property’s long-term value.
Building a Property Portfolio
As your property gains equity (the difference between the property’s value and the loan balance), you can use this equity as a deposit for another property. This strategy is key to building a property portfolio. Instead of saving for years to buy another property, you leverage the growth of your current property to keep expanding your investment portfolio, potentially increasing your wealth faster.
Other Investments
Some investors use investment loans to diversify beyond real estate. For example, you might use the loan to invest in shares, managed funds, or even a business. However, it’s important to note that using an investment loan for non-property investments typically comes with different risks and regulations, so make sure to consult a financial advisor.
Loan Percentages (LVR) in Investment Loans
When it comes to how much you can typically let you borrow up to 80% of the property’s value, known as the Loan-to-Value Ratio (LVR). If the property is worth $500,000, you can borrow $400,000 with an LVR of 80%. For first-time investors, some lenders may even allow you to borrow up to 95%, but you’ll need to pay
LMI to cover the additional risk.
Risks of High LVR Loans
- Higher Interest Rates: Loans with high LVRs typically come with higher rates.
- LMI Costs: Borrowing more than 80% means additional costs for LMI.
- Negative Equity Risk: If property values drop, you could owe more than the property is worth, putting you at risk if you need to sell or refinance.
For first-time investors, it’s often better to aim for a lower LVR and avoid these risks if possible.
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