Why should concreters research before taking investment loans

Investment market research is not about reading suburb profiles on a property portal.

It is about working out whether the rental income and growth assumptions you are using to choose a property are backed by real numbers, and then matching your loan structure to what you find. A concreter earning $110,000 a year who assumes a property will rent for $550 a week and then discovers it rents for $480 after settlement has just locked in a bigger monthly shortfall than their serviceability assessment allowed for. That outcome is avoidable if the research happens before the loan application, not after.

What counts as market research for an investment loan

Market research for an investment property loan means checking actual rental returns, actual vacancy periods, and actual holding costs for the type of property you are considering. You need to know what tenants in that area pay, how long similar properties sit empty between leases, and what body corporate fees, council rates and insurance add up to each quarter.

Consider a concreter looking at a two-bedroom unit to build passive income while still working full time. If the advertised rental estimate is $520 per week but similar units in the same block have been sitting vacant for six weeks and the last three leases settled at $485, the shortfall between loan repayments and rental income changes. That difference affects whether you structure the loan as interest only or principal and interest, whether you fix or stay variable, and whether the property still fits within your borrowing capacity once the lender applies their serviceability buffer.

We regularly see tradies who have done solid research on the build quality and street appeal of a property but have not checked what comparable properties actually rent for or how long they stay tenanted. The loan amount you can service depends on the income the property generates, and lenders calculate serviceability on rental income after applying a reduction, often around 20 per cent, to account for vacancy and management costs. If your research shows a higher than usual vacancy rate for that property type, the lender's assumption may still be optimistic, and you will wear the real cost.

Vacancy rates and loan structure

Vacancy rates directly affect whether an interest only loan structure works for your situation. Interest only investment loans reduce your monthly repayment during the interest only period, usually up to five years, which can improve cash flow if rental income does not cover the full principal and interest repayment. But if the property sits vacant for two months every year, you are covering the full loan repayment, all holding costs, and wearing the income gap on your own cashflow during those periods.

Local vacancy data is published by some state rental authorities and property data providers, but the most useful figure is the vacancy rate for the specific property type in the specific precinct you are considering, not the suburb average. A suburb might have a 2 per cent vacancy rate overall, but if that figure is driven by high demand for detached houses and your unit block has a 6 per cent vacancy rate because of oversupply, the suburb figure is not relevant to your loan structure decision.

If your research shows vacancy risk is low and rental demand is stable, an interest only loan can work well for building your property portfolio. If vacancy risk is higher, a principal and interest loan means you are paying down the loan amount during tenanted periods, which reduces your exposure when the property is empty. Some concreters we work with prefer principal and interest from the outset because it removes the decision point at the end of the interest only period and means equity builds regardless of market conditions.

Rental yield affects borrowing capacity

Rental yield is the annual rental income as a percentage of the purchase price. A property that rents for $500 per week and costs $520,000 has a gross yield of about 5 per cent. Lenders use rental income to offset the loan repayment when calculating your borrowing capacity, but they do not use the advertised rent or the rent you hope to achieve. They use either the current lease amount or a figure based on a rental assessment, and then they apply a reduction, typically 20 per cent, to account for vacancy, management fees and maintenance.

If you are earning $115,000 as a concreter and you want to borrow $450,000 for an investment property, the lender will assess your ability to service that loan at a rate at least 3 percentage points above the actual loan rate. If the property rents for $520 per week, the lender will use around $416 per week as income after applying their reduction. The gap between the loan repayment at the assessed rate and that reduced rental income is added to your other commitments when the lender calculates serviceability.

If your research shows the rental income is lower than you first assumed, your borrowing capacity falls. That might mean you need a larger deposit, or it might mean the property does not work for your current income and debt position. Running those numbers before you make an offer means you can adjust your property search or your loan structure before you are committed.

Claimable expenses and negative gearing under the new rules

Interest on an investment loan is a claimable expense against rental income, along with council rates, insurance, property management fees, repairs and depreciation. For properties you held or had under contract at 12 May 2026, or for eligible new builds acquired after that date, you can continue to deduct any loss from your investment property against your wage income. That is still the case for most concreters reading this, because the new negative gearing rules do not apply to properties held at that date.

For established investment properties acquired after 12 May 2026, losses from the 2027-28 income year onward can only be deducted against income from residential properties, not against wages. Losses you cannot use in a given year carry forward to offset residential property income, including capital gains, in future years. If you are looking at an established property now and you did not have a contract in place by 12 May 2026, the tax benefit of negative gearing is different, and that affects whether the investment makes sense relative to an eligible new build.

An eligible new build includes a dwelling built on previously vacant land or a development that increases the number of dwellings on the site. A knock-down rebuild that replaces one house with one house is not an eligible new build. A new build that has been owner-occupied for more than 12 months before you buy it loses access to the negative gearing exemption for you as the next purchaser.

Market research at this point means checking whether the properties you are considering were held at the cut-off date, whether they qualify as new builds, and what the after-tax cash flow looks like under both scenarios. For some concreters, that research shifts the investment strategy from established units in inner suburbs toward new builds in growth corridors, because the tax treatment and the loan serviceability both work differently.

Capital gains tax from 1 July 2027

From 1 July 2027, capital gains on investment properties are taxed differently. For gains that accrue from that date, you will index the cost base of your property in line with inflation and pay tax on above-inflation gains only, with a minimum tax rate of 30 per cent on the indexed gain. The existing 50 per cent CGT discount continues to apply to gains accruing before 1 July 2027. For eligible new builds, you can choose between the old discount method and the new indexed method when you sell, whichever gives the lower tax.

If you are buying an investment property now and holding it for ten or fifteen years, the portion of any capital gain that accrues after 1 July 2027 will be taxed under the new rules. If inflation runs high, indexation may deliver a lower tax outcome than the 50 per cent discount. If inflation is low and your marginal tax rate is below 60 per cent, the discount might still win. The choice matters more for new builds, because you get to pick.

This does not change the market research you need to do before buying, but it does affect the growth assumptions you use when modelling the investment return. A property that delivers most of its return through capital growth rather than rental yield will be affected more by the CGT changes than a property with strong rental income and modest growth. Both can be sound investments, but the after-tax return profile is different, and that flows back into which loan structure and which property type make sense for your situation.

Why loan features should follow research, not the other way around

Too many concreters choose a loan product before they have finished their property research, and then they try to make the property fit the loan. The correct sequence is research first, property decision second, loan structure third.

If your research shows strong rental demand, low vacancy, and high tenant turnover costs, you might want a loan structure that minimises the need to refinance or change lenders, because stability matters more than chasing the lowest rate every two years. If your research shows the property will negatively gear for the first three years and then move to neutral or positive cash flow as rents rise, you might want a variable rate loan so you can make extra repayments and pay down the principal once cash flow allows, without paying break costs on a fixed term.

If your research shows you are buying in an area with high body corporate fees and a building remediation levy coming due in two years, you need to know that before you calculate your monthly shortfall and before you apply for the loan. The lender's serviceability assessment does not include future special levies, but your actual cash flow will.

For finance for tradies working in concreting, income is often variable depending on the number of jobs, the weather, and whether you are working as a sole trader or through a company. That makes the loan serviceability buffer even more important, because the lender is already assessing your repayment capacity at a rate 3 percentage points above the loan rate. If your income drops during a quiet quarter and your investment property is vacant at the same time, you need enough margin in your cash flow to cover both.

Interest rate type and investment loan refinancing

Whether you fix or stay variable depends on your view of rate movements and your tolerance for repayment changes, but it also depends on what your research tells you about the property's cash flow stability. A variable rate loan gives you the ability to make extra repayments, redraw if the loan allows it, and refinance without break costs. A fixed rate loan gives you repayment certainty for the fixed period, which can matter if your rental income is stable but your concreting income varies seasonally.

Most investment loan refinancing happens because the rate is no longer competitive, because the borrower's situation has changed, or because the loan features no longer suit the investment strategy. If you refinance within a fixed rate term, you will likely pay break costs, which are calculated based on the lender's funding cost difference between the fixed rate you agreed to and the current wholesale rate for the remaining fixed period. Those costs can run to thousands of dollars, and they are not tax deductible.

If your market research shows you might want to sell the property or significantly change your loan structure within three years, fixing for five years creates a financial penalty for doing so. If your research shows you are holding the property long term and you want repayment certainty while you build equity in your own home at the same time, fixing part of the loan can work well.

Deposit size, LMI and loan to value ratio

Most lenders will lend up to 90 per cent of the property value for an investment loan if you pay LMI, and up to 80 per cent without LMI. Some lenders cap investment lending at 80 per cent regardless of LMI. The deposit you need depends on the lender's maximum LVR for investment loans and whether you are using equity from another property or cash savings.

LMI is a one-off premium that protects the lender if you default and the property sells for less than the loan amount. It is calculated on a sliding scale based on the loan amount and the LVR, and it can add thousands of dollars to your upfront costs. Some lenders allow you to capitalise the LMI premium into the loan amount, which means you do not pay it in cash at settlement but you do pay interest on it for the life of the loan.

If your market research shows the property is in an area with strong rental demand and low vacancy, and you are confident in the rental income, borrowing at 90 per cent LVR and paying LMI might make sense because it gets you into the investment sooner and you keep more cash for holding costs and future opportunities. If your research shows higher vacancy risk or upcoming body corporate costs, a larger deposit and a lower LVR reduces your repayment, your loan amount, and your exposure if the property sits empty.

For concreters using home loans for tradies to buy their own home and now looking at an investment property, equity in your home can be used as part or all of the deposit for the investment loan. The combined LVR across both properties is what matters for the lender's assessment. If you borrow against equity and your total lending across both properties exceeds 80 per cent of the combined property values, you will likely pay LMI on the new lending.

Call one of our team or book an appointment at a time that works for you. We will work through your research, your numbers, and your loan options, and we will tell you if something does not stack up before you commit to a property that does not suit your situation.

Frequently Asked Questions