As a builder, you understand the value of solid foundations – and that applies to your financial future too. Investment loans for purchasing rental properties can provide builders with an additional income stream while building long-term wealth through real estate.
Understanding Investment Loans
An investment loan is specifically designed for buying a rental property that generates income through tenant rent payments. Unlike owner-occupier loans, these are structured differently because the property isn't your primary residence. Banks and lenders across Australia offer various investment loan options, each with different features and requirements.
When you're looking at buying an investment property, you'll typically need a higher deposit than a standard home loan. Most lenders require at least 20% of the property value to avoid lenders mortgage insurance (LMI), though some may accept 10-15% with LMI included.
Types of Investment Properties
Builders have several options when choosing an investment property:
• Stand alone dwelling – Houses offer potential for renovation and value-adding
• Town house – Lower maintenance with moderate rental yields
• Apartment – Often located in high-demand rental areas with strong tenant interest
Each property type comes with different rental yield potential and maintenance requirements, so research property markets thoroughly before making your decision.
Interest Rates and Loan Features
Investment loan interest rates are typically higher than owner-occupier rates. You can choose between:
• Variable interest rate – Fluctuates with market conditions
• Fixed interest rate – Locked rate for a specific period
• Split loans – Combination of both variable and fixed portions
Many lenders offer interest rate discounts based on your loan amount, loan to value ratio (LVR), and professional status as a builder.
Ready to get started?
Book a chat with a Finance & Mortgage Brokers at Tradie Home Loans today.
The Application Process
Applying for an investment loan involves several steps:
- Assess borrowing capacity – Lenders calculate how much you can borrow based on income, expenses, and existing debts
- Prepare documentation – You'll need bank statements, tax returns, and proof of income
- Property research – Identify suitable investment properties in your target area
- Submit investment loan application – Complete the streamlined application process
- Property valuation – Lender arranges independent valuation
- Settlement – Finalise the purchase
Calculating Investment Loan Repayments
When calculating investment loan repayments, consider:
• Principal and interest payments
• Investment loan interest rate
• Loan term (typically 25-30 years)
• Rental income from the property
• Ongoing property expenses
Many builders find that rental yield from their investment property covers a significant portion of loan repayments, particularly in high-demand areas.
Tax Benefits and Negative Gearing
Negative gearing occurs when your rental income is less than your property expenses, including loan interest. This creates a tax deduction that can reduce your overall tax liability – particularly valuable for builders in higher tax brackets.
Other tax benefits include:
• Depreciation on building and fixtures
• Property management fees
• Maintenance and repairs
• Stamp duty (in some circumstances)
Building Your Investment Property Portfolio
Many builders start with their first investment property and gradually build an investment property portfolio. Your building industry knowledge gives you unique advantages in:
• Identifying properties with renovation potential
• Understanding construction quality and building issues
• Estimating renovation costs and timeframes
• Adding value through improvements
Property Investment Strategy
Develop a clear property investment strategy before buying a rental property. Consider:
• Target market (students, families, professionals)
• Location preferences and growth potential
• Property type and condition
• Expected rental yield and capital growth
• Long-term financial goals
The property market can fluctuate, so invest in real estate with a long-term perspective rather than seeking quick returns.
Choosing the Right Lender
Access investment loan options from banks and lenders across Australia by working with experienced mortgage brokers who understand the building industry. Different lenders offer varying:
• Investment loan interest rates
• Borrowing capacity calculations
• Property investment loan features
• Application timeframes
• Ongoing service levels
As a builder, you may qualify for professional packages that include reduced rates and waived fees.
Investment loans provide builders with opportunities to diversify income and build wealth through rental property ownership. With proper planning and professional guidance, purchasing rental properties can become a valuable part of your financial strategy.
Ready to explore investment loan options for your first investment property or expand your existing portfolio? Call one of our team or book an appointment at a time that works for you.
