Unlock the secrets to financing your investment townhouse

Investment townhouses sit in a sweet spot for bricklayers looking to build wealth without the maintenance headaches of a free-standing property.

Townhouses often deliver higher rental returns than apartments because tenants get more space and outdoor access, while body corporate fees stay lower than high-rise apartment buildings. For self-employed tradies, lenders assess your income differently from PAYG workers, and that assessment decides how much you can borrow and which investment loan products you can access.

What deposit do you need for an investment townhouse?

Most lenders require a 20 per cent deposit for investment property finance to avoid Lenders Mortgage Insurance. A 10 per cent deposit is possible with some lenders, but you will pay LMI and face stricter serviceability tests.

Consider a bricklayer purchasing an investment townhouse. If the purchase price sits at the median for the target suburb, a 20 per cent deposit avoids LMI and gives access to sharper investor interest rates. Lenders view a larger deposit as lower risk, and that risk assessment flows through to the rate they offer. Choosing a 10 per cent deposit path means paying LMI upfront or capitalising it into the loan amount, which increases your loan to value ratio and monthly repayments.

How lenders assess your income as a self-employed bricklayer

Lenders calculate your borrowing capacity using two full years of tax returns plus a profit and loss statement for the current year. They add back depreciation and some business expenses, but they also deduct personal drawings and non-recurring income.

In our experience, bricklayers who structure their business to maximise tax deductions during the financial year can find their assessable income drops below what they actually earn. A bricklayer running a sole trader ABN who claims vehicle expenses, tools, and work-related costs might show $80,000 taxable income while taking home significantly more. Lenders look at the declared figure, not your bank balance. The application should include your accountant's breakdown showing add-backs for depreciation and one-off expenses to lift your assessable income closer to your real earning capacity. Some lenders who specialise in self-employed loans for tradies take a more practical view of tradie income, which can add tens of thousands to your borrowing capacity.

Variable or fixed rate for your investment loan?

Variable interest rates give you flexibility to make extra repayments without penalty and to redraw funds if you need them. Fixed interest rates lock in your repayment amount for one to five years, but most fixed products do not allow extra repayments above a small annual cap.

Investment property rates sit higher than owner-occupied rates. The gap varies by lender, but expect to pay between 0.30 and 0.70 percentage points more on an investment loan. Your deposit size and whether you choose principal and interest or interest only repayments also affect the rate. A 20 per cent deposit with principal and interest repayments will secure a lower rate than a 10 per cent deposit with interest only.

Interest only or principal and interest repayments?

Interest only investment loans let you pay just the interest portion each month, which reduces your repayment and increases your cashflow. Principal and interest repayments are higher but reduce your loan balance over time.

Interest only periods usually run for one to five years, after which the loan reverts to principal and interest unless you reapply for another interest only term. Lenders assess whether the property can service principal and interest repayments even if you start on interest only. Many bricklayers choose interest only during the first few years to maximise tax deductions and redirect cashflow into renovations, additional deposits, or paying down non-deductible debt like an owner-occupied mortgage through debt recycling strategies.

What changed with negative gearing in July 2027?

From 1 July 2027, rental losses on residential investment properties purchased after 7:30pm on 12 May 2026 cannot be offset against your wages or other non-residential income. Losses must be quarantined and carried forward to offset future rental income or capital gains from residential property sales.

The quarantine does not apply to eligible new residential dwellings, which means townhouses built on previously vacant land or developments that increase the total number of dwellings on a site. A knock-down rebuild that replaces one dwelling with one townhouse does not qualify. A development that replaces one house with three townhouses does qualify. If you buy a newly built townhouse that has already been occupied for more than 12 months, it loses the exemption. Properties purchased before the May 2026 cut-off date, including those under contract at that time, continue under the old rules regardless of when they settle.

For bricklayers earning strong trade income, the quarantine reduces the immediate tax benefit of holding a negatively geared property unless you target an eligible new build. Positively geared properties and those with small shortfalls remain viable because the cashflow impact is limited. If you already own your first investment property and are looking at expanding your property portfolio, the new rules shift the focus toward properties with higher rental yields or new builds that retain full negative gearing.

What expenses can you still claim on an investment townhouse?

Interest on your investment loan remains fully deductible regardless of the negative gearing changes. Other claimable expenses include body corporate fees, council and water rates, landlord insurance, property management fees, repairs and maintenance, and depreciation on the building and fixtures.

Body corporate fees for townhouses typically sit between $1,000 and $3,000 per year depending on the size of the complex and what the body corporate covers. Newer townhouse developments often include higher body corporate fees because they cover building insurance, common area maintenance, and sinking fund contributions for future repairs. Older complexes with fewer common facilities charge less. These fees are fully deductible, but they also reduce your net rental income and affect how much rent you need to cover your holding costs.

How rental income affects your serviceability

Lenders apply a shading factor to rental income, usually between 70 and 80 per cent, to account for vacancy periods and maintenance costs. If a townhouse rents for $600 per week, the lender will assess it at $480 to $504 per week depending on their policy.

APRA requires lenders to add a three percentage point buffer to the loan's interest rate when testing whether you can service the repayments. If the investment loan rate sits at 6.50 per cent, the lender tests your serviceability at 9.50 per cent. Debt-to-income caps also apply. From February 2026, lenders can only write up to 20 per cent of new investor loans at a debt-to-income ratio of six times or more. For a bricklayer with $90,000 assessable income, a total debt load above $540,000 sits in that restricted zone, and not every lender will approve it.

When does investment loan refinancing make sense?

Refinancing an investment property loan makes sense when you can secure a lower rate, access equity for another purchase, or switch from interest only to principal and interest after your initial term expires. Lenders reassess your income and serviceability at refinance, so your current year's tax return and profit and loss statement need to support the loan amount.

If your townhouse has increased in value since purchase, refinancing lets you access that equity without selling. A townhouse bought for $500,000 that is now worth $600,000 gives you $100,000 in equity. At an 80 per cent loan to value ratio, you could borrow up to $480,000 against the property. If your current loan sits at $400,000, you can access $80,000 in usable equity for another deposit or to fund renovations. That borrowed equity remains tax-deductible if used for income-producing purposes.

Finding the right lender for your investment loan application

Not all lenders assess tradie income the same way. Some lenders rely strictly on two years of tax returns and will not consider add-backs. Others take a more flexible approach and work with your accountant's figures to reflect your true earning capacity. Rate discounts also vary. A lender advertising a headline rate may not offer that rate to self-employed borrowers, while another lender with a slightly higher advertised rate might deliver a lower actual rate after assessing your application.

Tradie Home Loans works with lenders across Australia who understand how bricklayers structure their income and what expenses can be added back during serviceability calculations. That access means you get matched to investment loan products that reflect your real financial position, not just your taxable income. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions