Can You Afford an Investment Property? Here’s How to Know
Buying an investment property can be a rewarding step toward building long-term wealth. But without a clear-eyed view of your finances, the dream of rental returns and capital growth can quickly become a burden. If you’re considering this strategy, here’s how to assess whether you’re financially ready.
💰 Know Your Borrowing Power
Your borrowing capacity is the foundation of your property investment journey. It’s determined by your income, living expenses, outstanding debts, and credit history. A mortgage broker can help you calculate how much lenders may approve and guide you on whether a cash deposit or equity from an existing property is a better strategy.
Smart brokers also simulate different scenarios—such as rental vacancies or interest rate shifts—to ensure your loan remains serviceable during tough periods. They’ll help you decide between fixed, variable, or interest-only loan options tailored to your investment goals. Once pre-approved, you’ll have the confidence to begin property hunting.
🏡 Plan for More Than the Mortgage
Property investment includes both upfront and ongoing costs. Expect to pay for stamp duty, legal fees, inspections, and possibly lenders mortgage insurance (LMI) if your deposit is below 20%.
Ongoing expenses include council rates, water charges, body corporate fees, landlord insurance, property management, and general maintenance. If the property sits vacant, you still carry these costs—so it’s wise to build a safety buffer of three months’ expenses.
🔨 Renovation isn’t Just Cosmetic
Thinking of adding value through renovations? Great—but budget wisely. From plumbing fixes to roof repairs or aesthetic upgrades, costs can escalate quickly. Overestimating expenses and maintaining a contingency fund is essential.
If managed properly, renovations could enhance borrowing capacity and rental returns. A mortgage broker can advise if refinancing or topping up your loan is a smart move, weighing costs against projected growth.
📉 Be Realistic About Rental Returns
Lenders typically use 70–80% of estimated rental income to factor in vacancies and fluctuations. Research similar properties and current listings to understand realistic rental income. Also consider the suburb’s vacancy rates and seasonal demand—some areas have higher turnover or quieter periods that can affect income stability.
📅 Start Early—Plan Smarter
Engaging with a mortgage broker early helps shape your strategy. From understanding cash flow to building financial buffers, early planning is key to navigating unexpected costs and making informed choices.
🤝 Trust in Mortgage Brokers Remains Strong
According to the 2025 Consumer Access to Mortgages report, mortgage brokers are more trusted than bank staff, with 82% of borrowers preferring brokers. As many homeowners transition from fixed to variable rates amid rising interest costs, brokers continue playing a vital role in helping clients refinance and re-strategize.
Despite financial pressures, many investors still see property as a viable option, highlighting the need for informed guidance. Yet 40% of consumers still misunderstand broker services—many believe they carry hidden fees. Clarifying their value is a crucial step for real estate professionals.