Avoid These 7 Mistakes When Buying an Investment Apartment

Choosing the Wrong Loan Structure for Your Apartment Purchase

The biggest mistake apartment investors make is choosing interest-only repayments without understanding how that decision affects their borrowing capacity and long-term equity position. Interest on borrowings used to acquire or hold residential rental property is deductible against assessable income to the extent the property is rented or held to produce assessable income. Many investors assume interest-only is automatically the right choice because it maximises tax deductions in the short term, but that approach can limit your ability to refinance or purchase additional properties down the line.

Consider an investor buying a two-bedroom unit in one of Bundall's waterfront complexes. If they take an interest-only loan and property values remain flat for three years, they have built no equity through repayments. When they approach a lender to purchase a second property, their borrowing capacity is calculated on the outstanding balance of the first loan, which has not decreased. Compare that to an investor on principal and interest repayments who has reduced their loan balance and increased their equity position, creating more room to borrow again. The interest deduction on a principal and interest loan is only marginally lower in the early years, but the equity gain can be substantial.

Bundall has a large proportion of high-rise and mid-rise apartment stock near the Nerang River and around the Light Rail corridor. Body corporate fees in these complexes range widely depending on the age of the building and the amenities included. Some newer towers with pools, gyms and concierge services carry quarterly fees well over $2,000. Lenders assess rental income after deducting these fees, so a unit generating $650 per week in rent but carrying $2,500 in quarterly body corporate costs will be assessed at a much lower net income than the gross figure suggests. If your serviceability is already tight, that difference can determine whether your application is approved or declined.

Underestimating How Body Corporate Costs Affect Serviceability

APRA requires all ADIs to assess new borrowers' capacity to service a home loan, including a residential investment loan, at an interest rate that is at least 3.0 percentage points above the loan product rate. Lenders apply this buffer to the interest rate and then calculate whether your income can support the repayments after accounting for all your living expenses, existing debts and the net rental income from the property. Body corporate fees reduce the rental income used in that calculation, which in turn reduces how much you can borrow.

In a scenario where an investor is looking at a one-bedroom apartment in a Bundall complex with a $600 weekly rent and a $2,200 quarterly body corporate fee, the lender will typically assess the rental income at around 80 per cent of the gross amount to account for vacancy and maintenance, then subtract the body corporate cost. The net assessable income drops to around $380 per week. If that same investor were buying a townhouse with no body corporate and the same rent, the assessable income would be closer to $480 per week. That $100 weekly difference translates to a significantly lower borrowing capacity, sometimes by tens of thousands of dollars.

Some lenders are more generous than others in how they treat body corporate fees and rental income shading. We regularly see investors who have been declined by one lender get approved by another simply because the second lender's serviceability policy treats strata costs differently. Knowing which lender to approach in the first place saves time and protects your credit file from unnecessary enquiries.

Ignoring the Debt-to-Income Limit Introduced in February

APRA activated a DTI lending limit on 27 November 2025, effective from 1 February 2026, applying to all ADIs. Each ADI may lend, measured on a quarterly basis, up to 20 per cent of new investor loans and up to 20 per cent of new owner-occupier loans to borrowers with a total DTI ratio of six times or greater. Most borrowers are unaware this limit exists, but it has real consequences for investors with high incomes and large deposits who assume they can borrow without constraint.

If your total household income is $150,000 and you already have a $700,000 home loan, your current debt-to-income ratio is 4.67. Adding another $200,000 investment loan takes you to 6.0, right at the threshold. If you want to borrow $250,000 instead, your ratio climbs to 6.33, and you fall into the restricted category. The lender can still approve you, but only if they have capacity left in their 20 per cent allocation for that quarter. If they have already hit their limit, your application will be declined or delayed until the next quarter, regardless of your deposit size or income stability.

Bundall's apartment market attracts a mix of local upgraders, interstate investors and some foreign buyers within the allowable categories. The proximity to The Star, the Light Rail and the Southport CBD makes it a popular choice for renters working in hospitality, health and professional services. Vacancy rates in well-maintained complexes near transport and amenities tend to be lower than in older buildings set back from main roads. Lenders will sometimes request a rental appraisal or refer to recent leasing data for comparable units in your building, particularly if the purchase price is above the local median or if the unit has unusual features such as a large terrace or restricted parking.

Overlooking Loan-to-Value Ratio Penalties on Investment Lending

APS 112 prescribes specific risk weights that apply to residential mortgage exposures based on the classification of the loan, its occupancy status and its LVR. Investor loans and interest-only loans generally attract higher risk weights than owner-occupied principal-and-interest loans at the same LVR. Those higher risk weights flow through to pricing. Most lenders apply an interest rate loading to investment loans compared to owner-occupier loans, and that loading increases as your loan-to-value ratio rises.

An investor borrowing at 70 per cent LVR on an investment apartment might pay 0.3 per cent more than an owner-occupier at the same LVR. At 80 per cent LVR, the gap often widens to 0.5 per cent or more. Above 80 per cent LVR, you pay not only a higher interest rate but also Lenders Mortgage Insurance, which is calculated on the full loan amount and added to your loan balance or paid upfront. To be eligible, the insurance must provide cover for all losses up to at least 40 per cent of the higher of the original loan amount and the outstanding loan amount, and must be provided by a lenders mortgage insurer regulated by APRA. LMI is generally required by ADIs on residential loans where the LVR exceeds 80 per cent.

Bundall's median apartment values have remained relatively stable over recent years, with modest growth driven by the area's proximity to Southport and access to the Light Rail. Units in older low-rise complexes near Bundall Road tend to be more affordable than high-rise apartments with water views and resort-style facilities. When lenders value an apartment for loan purposes, they instruct a valuer who considers recent comparable sales, the age and condition of the building, and any factors that might affect resale such as cladding issues, sinking fund adequacy or pending special levies. A unit that looks appealing on paper can sometimes be valued lower than the contract price, which immediately increases your effective LVR and may trigger LMI or require you to increase your deposit.

Failing to Understand the New Negative Gearing Rules

From the 2027-28 income year, losses related to established residential investment properties acquired after 7:30pm AEST on 12 May 2026 are deductible only against other income from residential properties, including capital gains on residential properties. Excess losses can be carried forward to offset residential property income in future years. Properties acquired between 7:30pm AEST on 12 May 2026 and 30 June 2027 may be negatively geared under the current rules until 30 June 2027 only. If you are buying an established apartment now, you need to factor in that any rental loss from the 2027-28 financial year onward cannot be used to reduce your taxable salary or business income.

For many Bundall investors, the cashflow impact is significant. Rental yields on two-bedroom apartments in the suburb typically sit between 4.5 and 5.5 per cent, depending on location and building quality. If your loan repayments, body corporate fees, council rates, insurance and other holding costs exceed your rental income, you are negatively geared. Under the old rules, that loss reduced your taxable income from other sources. Under the new rules, the loss can only be used against other residential property income or carried forward. If this is your first investment property and you have no other rental income or capital gains to offset, you will not see a tax benefit from the loss until you sell the property or acquire another rental.

Buying Without Considering Portfolio Growth Strategy

Many first-time investors focus entirely on the property itself and not enough on how the loan structure and equity position will support their next purchase. Each ADI may lend, measured on a quarterly basis, up to 20 per cent of new investor loans and up to 20 per cent of new owner-occupier loans to borrowers with a total DTI ratio of six times or greater. The limits apply separately to the owner-occupier and investor lending portfolios of each institution and apply to new lending only. If your first investment pushes you close to a DTI ratio of six, you need to plan carefully for how you will structure future borrowing.

One approach is to choose a loan product that allows you to redraw or access an offset account so that any surplus cash increases your available equity without forcing you to refinance. Another is to avoid maxing out your borrowing capacity on the first property, leaving room for a second purchase within a few years. In Bundall, that might mean buying a one-bedroom unit at a lower price point instead of stretching to a two-bedroom, or choosing a building with lower body corporate fees to preserve serviceability. The goal is not to buy the most expensive property you can afford, but to buy the property that best positions you for long-term growth.

Relying on Rental Income Estimates Without Local Context

Lenders do not accept your rental estimate at face value. They either apply a fixed shading percentage, typically 20 per cent, or they request a rental appraisal from a licensed property manager. In Bundall, rental demand is strongest for units within walking distance of the Light Rail stations at Southport or Broadbeach, or close to the dining and retail precinct around Ashmore Road. Units in buildings with dated interiors, limited parking or no lift access tend to attract lower rents and longer vacancy periods.

If your rental appraisal comes in at $550 per week but you have assumed $600 in your cashflow planning, that $50 shortfall compounds over time. It affects not only your weekly budget but also how the lender assesses your serviceability. A rental shortfall of $50 per week is roughly $2,600 per year, and when you account for the lender's shading and the serviceability buffer, that gap can reduce your borrowing capacity by $40,000 or more depending on your income and other commitments. Getting an accurate rental appraisal before you sign a contract is one of the most valuable steps you can take, and it costs nothing if you ask a property manager familiar with your target building or precinct.

If you are considering an investment loan for an apartment purchase in Bundall or anywhere on the Gold Coast, speaking with a mortgage broker in Bundall who understands the local apartment market and current lending policy will give you a clearer picture of what is possible and what to watch for. Call one of our team or book an appointment at a time that works for you.

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