Beginner's Guide to Investment Property Types

The property type you choose shapes every part of your investment loan structure.

Different property types carry different lending risks, which means lenders adjust their loan to value ratio, interest rate pricing, and rental income assessment depending on whether you're buying a house, townhouse, or apartment. That affects how much you can borrow, what deposit you'll need, and whether the numbers work.

Houses and Land Packages in Bass

Houses on standard residential land attract the most flexible lending terms across almost all lenders.

Lenders generally offer their lowest investor interest rates and highest loan to value ratios for detached houses, which means you can access investment loan options with a deposit as low as 10% plus Lenders Mortgage Insurance. Rental income assessments are typically more straightforward because vacancy rates are lower and comparable rental data is easier to source. In Bass, where the housing stock includes a mix of rural lifestyle properties and newer residential builds closer to the highway, lenders treat standard residential allotments more favourably than larger rural parcels. A three-bedroom house on a quarter-acre block will generally qualify for better loan terms than a five-acre lifestyle block, even if the purchase price is similar.

Consider a buyer purchasing a house in Bass close to the township centre. With the property zoned residential and connected to town services, most lenders will assess rental income at 80% of the verified market rent and offer standard investment loan products without additional conditions. If that same buyer were looking at a property on five acres with a septic system and tank water, some lenders would reduce the rental income assessment to 70% or apply a higher interest rate due to perceived resale risk.

Townhouses and Villas

Townhouses are treated similarly to houses provided they're on a single title or a small strata plan.

When a townhouse is part of a strata scheme with fewer than six dwellings, most lenders apply the same lending criteria as a detached house. Rental income is assessed at 80%, and the loan to value ratio can reach 90% with Lenders Mortgage Insurance. Body corporate fees are factored into your serviceability calculation, so lenders deduct those costs before assessing whether rental income covers the loan repayment. If body corporate fees are high relative to the rental return, that can reduce your investor borrowing capacity even if the property itself is within your price range.

In developments where the body corporate covers building insurance, garden maintenance, and common area upkeep, those fees might sit between $1,200 and $2,500 annually. Lenders treat those as an ongoing expense that reduces your net rental income, which in turn affects how much you can borrow. The calculation works like this: verified market rent minus body corporate fees minus a vacancy allowance, then multiply by 80%. That figure is what lenders use to assess serviceability.

Apartments and Higher-Density Strata

Apartments in buildings with more than six dwellings are assessed more conservatively.

Lenders reduce the loan to value ratio to between 80% and 90% depending on the building size, location, and construction type. Some lenders apply a loan amount cap, which means even if you have a 20% deposit, they may not lend more than a set dollar figure on an apartment in a high-density building. Rental income is often assessed at 70% instead of 80%, which reduces your borrowing capacity compared to a house at the same price. Body corporate fees for apartments are typically higher, sometimes between $3,000 and $6,000 annually, and those costs come off the top before lenders calculate your net rental return.

Bass itself has limited apartment stock, but investors in the area sometimes look to nearby centres like Wonthaggi or Phillip Island for higher-density options. If you're comparing a house in Bass to an apartment in Cowes, the difference in lending terms can shift the numbers significantly. The apartment might require a larger deposit, attract a higher interest rate, and deliver lower borrowing capacity even if the purchase price is identical.

New Builds Versus Established Properties

New builds offer tax advantages but may carry lending restrictions depending on the location and builder.

Under current tax settings, new residential properties allow you to claim depreciation on fixtures, fittings, and the building itself, which can increase your claimable expenses and reduce taxable income. Lenders generally treat new builds the same as established properties for loan to value ratio and interest rate purposes, provided the property is in an established area with strong resale demand. If the property is part of a large new estate or a location with high supply, some lenders apply additional conditions or reduce the loan to value ratio to manage oversupply risk.

With the changes to negative gearing and capital gains tax announced in the recent Federal Budget, new builds purchased after May 2026 retain access to the 50% capital gains discount and full negative gearing benefits, while established properties purchased after that date do not. That distinction has shifted the relative appeal of new versus established stock for investors, particularly those planning to hold for the long term.

Rural and Lifestyle Properties

Properties on larger allotments or outside township zones are assessed as specialist lending.

Once a property exceeds two hectares or is zoned rural residential or farming, most mainstream lenders either decline the application or refer it to a specialist rural lending division. Those divisions apply stricter criteria: higher deposit requirements (often 20% to 30%), reduced rental income assessments (commonly 60% to 70%), and in some cases, higher interest rates. For investors, the challenge is that rental demand for larger rural properties is thinner, which makes vacancy rates harder to predict and rental income harder to verify.

In Bass, where properties close to the coast or with rural views are common, it's worth understanding where lenders draw the line. A two-hectare block zoned low-density residential may still qualify for standard investment loan products with certain lenders, while a five-hectare block zoned farming zone will almost certainly require specialist lending. The difference affects not just your deposit and interest rate, but whether the property generates enough rental income to meet serviceability requirements.

Commercial and Mixed-Use Properties

Commercial property and mixed-use buildings are assessed under commercial loan structures, not residential investment loans.

If you're considering a shop with a residence above it, or a property with commercial tenants, lenders treat that as a commercial transaction. Loan to value ratios are typically capped at 70%, interest rates are higher, and loan terms are shorter. Rental income is assessed differently, often requiring a formal lease agreement and tenant financials. For investors used to residential lending, the shift in structure can be significant, particularly around serviceability and exit strategy.

Mixed-use properties in regional areas like Bass are rare, but they do appear occasionally, particularly in townships with main street frontage. If you're weighing up a residential investment property versus a commercial opportunity, the lending structure will determine whether the deal is viable.

How Lenders Assess Rental Income Across Property Types

Lenders use a combination of rental appraisals, comparable leases, and internal postcode data to verify rental income.

For houses and townhouses, most lenders accept a rental appraisal from a licensed property manager and assess 80% of that figure as serviceability income. For apartments, the assessment often drops to 70%, and for rural or unique properties, it can fall to 60% or require actual lease documentation. If you're purchasing in an area with limited rental comparables, lenders may request additional evidence or apply a conservative assessment, which reduces how much you can borrow.

In Bass, where the rental market is driven by a mix of long-term residents, seasonal workers, and short-term holiday demand, lenders typically require evidence of long-term rental history rather than short-term letting income. That means if you're planning to use a property for holiday rental, most lenders won't include that income in their serviceability calculation unless you can demonstrate a consistent, documented rental history over at least 12 months.

Choosing the Right Property Type for Your Strategy

Your investment loan structure should match the property type to your broader wealth-building goals.

If your strategy is focused on capital growth with moderate rental return, a house in an established residential area will generally offer the most flexible loan terms and the widest range of lenders. If you're prioritising cash flow and tax deductions, a new build with depreciation benefits may suit, provided you're comfortable with the recent tax changes affecting future capital gains. If you're looking at apartments or higher-density strata, factor in the reduced loan to value ratio and rental income assessment before committing to a price range.

The property type also affects your ability to leverage equity for portfolio growth. Houses typically revalue more predictably, which makes equity release and refinancing more straightforward. Apartments in smaller markets can be harder to revalue, and some lenders apply conservative valuation policies that limit how much equity you can access.

Call one of our team or book an appointment at a time that works for you. We can walk through the lending criteria for different property types, show you how rental income assessments affect your borrowing capacity, and help you structure an investment loan that aligns with your long-term property investment strategy.

Frequently Asked Questions