Smart ways to approach a duplex investment loan

A duplex gives you two rental incomes from one title and one settlement, which means less up-front cash and lower holding costs than buying two separate properties.

The lending rules changed when APRA introduced debt-to-income caps in February, and they're changing again when negative gearing quarantine starts in July 2027. If you're a painter with irregular income patterns or you're buying an older duplex rather than a new build, the difference between those two scenarios is the difference between writing off your loss against your wages or waiting years to use it.

How lenders calculate your borrowing capacity for a duplex

Lenders add 80 per cent of the expected rental income from both units to your assessable income, then apply a serviceability buffer three percentage points above the loan rate. If you're self-employed, they'll want two years of tax returns showing consistent income, and if your ABN trading shows a dip last financial year, they'll use the lower figure.

Consider a painter earning $95,000 through a company structure who finds a duplex that will rent for $550 per week on one side and $520 per week on the other. The lender counts $44,512 of the total $55,640 annual rent, then tests repayments at the loan rate plus three per cent. That buffer alone can cut your maximum loan amount by 20 to 25 per cent compared to what an online calculator shows you at the actual rate.

The DTI cap compounds that. From February, lenders can only put 20 per cent of their new investment loans above six times your income. If your assessable income after adding rental is $140,000, a DTI of six gives you a ceiling of $840,000. Some lenders will go there, most won't unless your deposit is 30 per cent or better.

Deposit size and LMI for investment property

You need a 10 per cent genuine savings deposit as an absolute floor for investor lending, but most lenders price their sharpest rates at 20 per cent deposit and their serviceability opens up meaningfully at 30 per cent.

Between 10 and 20 per cent you're paying Lenders Mortgage Insurance on the shortfall, and the premium gets capitalised into the loan. On a duplex purchase requiring a loan of $720,000 with a 15 per cent deposit, LMI might add $25,000 to $30,000 to your total debt. That capitalised premium doesn't reduce your taxable income because it's a capital cost, not a borrowing cost, so you only recover it through the cost base when you sell.

Some lenders won't go above 80 per cent LVR for duplexes at all if one or both titles are strata, or if the property is zoned low-density residential and doesn't meet their postcode criteria. Others will lend to 90 per cent but only if you've held your trading ABN for three or more years and can show 20 per cent deposit saved rather than released from equity.

Interest-only versus principal and interest for rental property

Interest-only keeps your monthly repayment lower and maximises the deduction you can claim, because every dollar of interest on an investment loan used to buy or hold a rental property is deductible when the property is rented or available for rent.

Most lenders will approve interest-only for one to five years on an investment loan, then revert you to principal and interest. The difference in monthly cost on a $700,000 loan at a variable rate of 6.5 per cent is roughly $1,850 per month. That gap matters if your租 rental income doesn't quite cover the repayment, because you're funding the shortfall from after-tax wages.

Under current law, that shortfall is a net rental loss and you can offset it against your painting income to reduce your tax. Under the quarantine rules starting 1 July 2027, you can't. If you buy an existing duplex after 7:30pm on 12 May 2026, any loss you make from 1 July 2027 onward can only be used against other residential rental income or carried forward. You don't lose the loss, but you can't use it to cut your tax bill each year unless you have other investment properties throwing off positive income.

The carve-out for new builds is the reason you'll see duplex developments advertised with a negative gearing stamp on them. A duplex built on previously vacant land, or a duplex that replaced a single dwelling, remains fully deductible under the old rules. A duplex built as a knock-down rebuild without increasing the dwelling count does not qualify.

Fixed or variable rate for a duplex investment

Variable gives you redraw, offset and the ability to pay extra or refinance without break costs. Fixed gives you payment certainty but locks you in, and if you need to sell or refinance before the fixed term ends, the break cost can run to five figures if rates have fallen since you fixed.

For a duplex specifically, variable makes more sense if you're planning to use rental income and tradie cash flow to pay down the loan faster than the minimum. It also makes sense if you're likely to want to refinance your investment loan in the next two years to pull equity for a second purchase.

A split loan, part fixed and part variable, doesn't deliver much unless you're splitting along a clear strategy, such as fixing the portion that matches your minimum holding cost and leaving the rest variable for extra repayments. In our experience most borrowers fix because they're worried about rate rises, not because the fixed portion aligns with a specific cash flow goal, and they regret it 18 months later when they can't access the equity.

Rental income assessment and vacancy assumptions

Lenders will order their own rental appraisal or use a desktop valuation that includes a rental range. If your agent's rental estimate is $1,100 per week combined and the lender's valuer says $980, the lender uses $980 and takes 80 per cent of that.

They also assume a vacancy rate, usually four to six weeks per year, which is baked into their serviceability test rather than deducted from the rental figure they quote you. That assumption doesn't change your loan approval as such, but it does mean the rent needs to be genuinely achievable, because the lender is already discounting it before they add it to your income.

If the duplex is still under construction or not yet tenanted, some lenders won't count any rental income at all until you provide signed leases. Others will count it but apply a bigger discount or require a higher deposit. The safest path is to wait until both sides are tenanted and you have lease agreements in place before you submit the application.

Stamp duty, depreciation and claimable expenses

Stamp duty on an investment property purchase in most states runs between 4 and 5.5 per cent of the purchase price depending on the bracket and any concessions. You pay it at settlement, it's not deductible, and it's not factored into your borrowing capacity because it's a one-off cost rather than an ongoing liability.

Once you settle, you can claim interest, council rates, strata fees if applicable, landlord insurance, property management fees, repairs and maintenance, and depreciation on the building and fixtures. Depreciation is the line item most tradie investors miss. A quantity surveyor's report costs around $600 and will usually find $5,000 to $15,000 per year in claimable depreciation on a duplex built or renovated in the last 20 years. That's a paper deduction, no actual cash outlay, and it reduces your taxable income every year until the schedule runs out.

Under the new negative gearing rules, those deductions still exist, but if they create a loss on a non-eligible property acquired after May 2026, the loss is quarantined from 1 July 2027. You still claim it, the ATO just won't let you use it against your wages.

What to do before you apply

Get a pre-approval before you make an offer. The settlement period on a duplex is usually 30 to 60 days, and if the lender's valuer comes in under your contract price or their credit team decides they don't like the strata report, you're scrambling to find another lender or renegotiating the price from a weak position.

Make sure your last two years of tax returns reflect consistent trading income and that your ABN has been active for at least 12 months, ideally two years. If you've claimed large deductions that pushed your taxable income below $60,000, some lenders will add back depreciation and work-related car expenses to rebuild your assessable income, but not all of them do, and none of them will add back wages you paid yourself and didn't declare.

If you're planning to use equity from your home, get a valuation done independently before you apply so you know what you're working with. Lenders will use their own valuer, but if your place is worth less than you think, your deposit disappears and the application fails. Knowing the number up front means you can adjust your target purchase price or save a bigger cash deposit before you go to market.

Call one of our team or book an appointment at a time that works for you. We'll map out what you can borrow, which lenders will actually say yes to a tradie buying a duplex, and whether the property you're looking at will get through their credit process before you waste time on a contract.

Frequently Asked Questions