The type of property you buy changes how lenders assess your investment loan and how the tax rules treat your rental losses. If you are buying an investment property in Hobart, it pays to compare property types before you compare loans.
What Are the Main Investment Property Types?
The main residential investment property types are established houses, units or apartments, townhouses, new builds, and vacant land you build on. Each has a different mix of upkeep, ongoing costs and tax treatment.
An established house usually means you own the land and carry the maintenance yourself. A unit or townhouse is often part of a strata scheme, so you pay body corporate levies on top of council rates and insurance. Those levies reduce what you keep from the rent, so include them when you work out your cash flow. Ask your accountant how they apply to your situation.
A new build, or a dwelling on land that was vacant, sits in its own tax category (more on that below). Lenders set their own policies on the property types they will lend against, so the same property can be treated differently by two lenders. This is where a broker who can compare investment loan options across many lenders earns their keep.
If you are still renting and want to invest before buying your own home, our rentvesting home loans page covers how that works.
How Property Type Changes Your Negative Gearing Position
Under the tax changes now law, whether you can use rental losses against your salary depends on when you acquired the property and whether it is an eligible new build. Speak with your accountant before you choose a property on tax grounds.
Losses on residential investment properties held at 7:30pm AEST on 12 May 2026, including those under contract and awaiting settlement, remain deductible against other income until the property is sold. Losses on eligible new builds acquired after that date can also still be deducted against all income.
For established residential properties acquired after that time, the rule changes from the 2027-28 income year. Net rental losses can then only be deducted against other residential property income, including capital gains on residential property. Excess losses carry forward. Properties acquired between 12 May 2026 and 30 June 2027 can use the current rules until 30 June 2027 only.
Eligible new builds include dwellings on previously vacant land, and replacements where the number of dwellings goes up. A knock-down rebuild that adds no dwellings, or a major renovation, is not eligible. A tax benefit never covers the whole loss. You still fund the shortfall from your own pocket.
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Interest Only vs Principal and Interest on a $500,000 Loan
Interest only keeps your repayments lower for a set period, but the loan balance does not fall, and the repayments rise when the period ends. The example below uses an illustrative rate of 6.75% p.a., not a current offer.
Consider an investor in Hobart who borrows $500,000 to buy a townhouse. On interest only at 6.75%, the repayment is about $2,813 a month. On principal and interest over 30 years at the same rate, it is about $3,243 a month.
Now say the investor takes five years of interest only. The balance is still $500,000 at the end of that period, and it must now be repaid over the remaining 25 years. At 6.75% the repayment becomes about $3,454 a month, roughly $641 more than the interest-only amount.
The outcome: the investor gains cash flow in the early years and pays more later. Lenders also assess an interest-only loan on the repayments you would face over the remaining term, so interest only does not lift how much you can borrow. On tax, only the interest part of a repayment is deductible, and the principal part is not. Your accountant can tell you how each structure affects your return. Use our mortgage repayment calculator to test your own numbers.
How Do LVR and LMI Apply to an Investment Loan?
The loan to value ratio (LVR) is your loan divided by the property's value. Lenders Mortgage Insurance (LMI) is generally required once it goes above 80%.
The 80% mark is not a legal borrowing limit. It is where lenders usually ask for LMI, and each lender sets its own maximum. The LMI premium is paid by you, and it adds to your upfront cost. The cost depends on your loan amount and LVR, so it varies by lender and insurer.
To see what a lender may allow, start with our borrowing capacity guide. Lenders usually count no more than 80% of expected rent as income, to allow for gaps between tenants. A higher-income earner may have extra options, which we cover on our page for investment property loans for high earners.
Matching the Loan to the Property You Choose
A loan that suited one property may not suit the next, so review your structure whenever your plans change. If you already own an investment loan, our loan health check shows whether it still fits.
Banks must also test new borrowers at a rate at least 3 percentage points above the loan rate, which applies to investment loans too. Non-bank lenders are not bound by that buffer, so comparing across both types of lender can widen your choices.
Ready to talk through the property types you are considering? Call one of our team or book an appointment at a time that works for you, and we will help you line up the right investment loan for your Hobart purchase.
Frequently Asked Questions
What are the main investment property types?
The main types are established houses, units or apartments, townhouses, new builds and vacant land you build on. Each has different running costs, lender treatment and tax treatment.
Does interest only increase how much I can borrow?
No. Lenders assess interest-only loans on the repayments you would face over the remaining term once principal and interest begins. This means interest only does not lift your borrowing capacity.
When do I need LMI on an investment loan?
LMI is generally required when your loan goes above 80% of the property's value. Each lender sets its own limits, and the premium is paid by you.
Does negative gearing apply to every investment property?
It depends on when you acquired the property and whether it is an eligible new build. Rules differ for established properties acquired after 12 May 2026, so speak with your accountant.
