How to Choose the Right Investment Property Type for Your Loan

When you're ready to invest in real estate, choosing the right property type can significantly impact your investment loan application and long-term returns. At LBK Lending, we help Bulimba clients access Investment Loan options from banks and lenders across Australia, and we've seen firsthand how property type affects everything from your loan to value ratio (LVR) to your rental yield.

Stand Alone Dwellings: The Traditional Choice

Stand alone dwellings remain popular among property investors for several reasons. These properties typically offer:

• Strong capital growth potential in established suburbs
• Higher rental yields in family-friendly areas
• More control over renovations and improvements
• Generally favourable lending terms from most lenders

When applying for an investment loan on a stand alone dwelling, lenders often view these properties as lower risk. This can translate to more competitive interest rate discounts and potentially lower lenders mortgage insurance (LMI) requirements depending on your loan amount and deposit.

The stamp duty on houses varies across states, but the potential for strong rental income often justifies the initial outlay. Many investors find that calculating investment loan repayments becomes more predictable with established rental markets for houses.

Apartments: Urban Investment Opportunities

Apartments present different opportunities and challenges for property investors. In areas like Bulimba and surrounding Brisbane suburbs, apartments can offer:

• Lower entry costs compared to houses
• Proximity to transport and amenities
• Appeal to young professionals and couples
• Potential for higher rental yields in CBD-adjacent locations

However, when buying a rental property in an apartment complex, consider that some lenders may have restrictions on certain developments. Your investment property loan features might include specific requirements about the building's completion status or the developer's track record.

The property investment strategy for apartments often focuses on cash flow rather than capital growth. Research property markets thoroughly, as oversupply in some apartment markets can affect both rental returns and property values.

Town Houses: The Middle Ground

Town houses combine elements of both apartments and houses, making them attractive for many property investors. When buying an investment property in the town house category, you'll find:

• More space than apartments but lower maintenance than houses
• Appeal to small families and professionals
• Often located in well-planned developments with amenities
• Balanced approach to capital growth and rental yield

The application process for investment loan approvals on town houses typically follows standard procedures. Lenders will assess your borrowing capacity based on the property's rental potential and your overall investment property portfolio goals.

Loan Considerations Across Property Types

Regardless of which property type you choose, several factors affect your rental property loan:

Interest Rate Options:
• Variable interest rate: Allows you to benefit from rate decreases
• Fixed interest rate: Provides certainty for budgeting and planning
• Split loans: Combining both variable and fixed portions

Your Investment Loan Interest Rate will depend on various factors including the property type, your deposit size, and current market conditions. Different property types may attract different pricing from lenders.

Deposit and LVR Considerations:
Most lenders require a minimum 20% deposit for investment properties to avoid LMI. However, some lenders offer no LMI loans for investment properties under specific circumstances.

Tax Implications and Strategy

Different property types can affect your tax position differently:

• Negative gearing benefits when property expenses exceed rental income
• Depreciation schedules vary significantly between new apartments and established houses
• Strata fees on apartments and town houses are tax-deductible but affect cash flow

Understanding these implications helps when developing your broader property investment strategy and choosing between property types.

Making Your Decision

When researching property options, consider:

1. Your available deposit and preferred loan amount
2. Target rental yield and capital growth expectations
3. Your risk tolerance and investment timeline
4. Local property market conditions in your chosen area
5. Ongoing maintenance and management requirements

For those purchasing their first investment property, starting with a well-located, established property often provides a solid foundation for building an investment property portfolio.

The streamlined application process we offer at LBK Lending means we can help you explore investment loan options across all property types. We'll work with you to understand your borrowing capacity and match you with appropriate lenders for your chosen property type.

Whether you're drawn to the stability of houses, the affordability of apartments, or the balance offered by town houses, the key is aligning your property choice with your financial goals and loan requirements. Each property type offers unique advantages, and the right choice depends on your individual circumstances and investment objectives.

Remember to factor in all costs including stamp duty, ongoing expenses, and loan repayments when making your investment property loan application. Having your bank statements and financial documentation organised will help speed up the application process regardless of which property type you choose.

Call one of our team or book an appointment at a time that works for you to discuss which investment property type aligns with your goals and loan requirements.