Not all investment properties are treated the same by lenders.
A two-bedroom unit in Charlestown and a four-bedroom house on acreage might both be investment purchases, but the loan structure, deposit requirement, and rental income assessment can differ significantly. Lenders categorise properties by type and apply different policies to each. Understanding those differences before you commit to a purchase protects your borrowing capacity and keeps your portfolio on track.
Residential Units and Apartments
Residential units are the most straightforward property type to finance. Lenders treat them as standard security, and most mainstream investment loan products are available without restriction. The rental yield in Charlestown units is typically higher than houses, which strengthens your serviceability when lenders assess your rental income.
Consider a buyer who purchases a two-bedroom unit near Charlestown Square. The rental demand from young professionals and downsizers is consistent, vacancy periods are short, and the body corporate covers building insurance and common area maintenance. The lender assesses the property at 80 per cent of the rental income and applies the standard serviceability buffer. The loan settles without delay, and the investor borrows at a loan to value ratio of 85 per cent with Lenders Mortgage Insurance covering the shortfall.
If the unit is in a building with more than 50 per cent non-owner-occupied tenants, or if the block has fewer than six units, some lenders will apply stricter conditions or decline the application outright. Check the strata report before you exchange contracts, not after.
Houses on Standard Residential Lots
Standalone houses on standard residential lots are the second most accessible property type for investors. Lenders view them as lower risk than units because there are no body corporate complications, no building defect concerns, and a broader resale market. The downside is rental yield, which is typically lower than units in the same suburb.
In Charlestown, a three-bedroom house close to public transport and local schools will attract families looking for stable, long-term tenancies. The rental income is lower per dollar of purchase price compared to a unit, so your borrowing capacity may reduce slightly depending on your other debts and income. The trade-off is stronger capital growth potential and fewer restrictions from lenders.
If you already hold one or two investment properties, adding a house rather than another unit can improve your portfolio balance and make refinancing or future purchases smoother.
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Townhouses and Duplexes
Townhouses and duplexes sit between units and houses in terms of lender treatment. Most lenders treat them as standard residential security, but the loan to value ratio limit may drop to 80 per cent if the property is part of a community title scheme with shared driveways or common areas. If the duplex is on its own title with no shared facilities, it is treated the same as a house.
Rental demand for townhouses in Charlestown is solid, particularly from families who want more space than a unit but cannot afford or do not want the upkeep of a full house. The body corporate fees are typically lower than apartment complexes, and maintenance responsibility is clearer.
Some lenders will not accept properties with shared driveways or cross-easements unless the title is structured in a specific way. If you are considering a duplex or townhouse, ask your broker to confirm lender acceptance before making an offer.
Properties on Large or Rural Lots
Properties on lots larger than 2.5 hectares, or located in rural or semi-rural zones, are classified differently by most lenders. Some will treat them as rural properties and apply stricter lending criteria, including lower loan to value ratios, higher interest rates, and reduced rental income assessment.
A property on acreage near the outskirts of Charlestown might appeal as a lifestyle investment, but the rental pool is smaller, vacancy periods are longer, and maintenance costs are higher. Lenders will typically assess rental income at 70 per cent instead of 80 per cent, and some will cap your borrowing at 70 per cent loan to value ratio regardless of your deposit.
If you are building a portfolio focused on passive income and portfolio growth, properties on large lots add complexity without necessarily improving returns. They work better as long-term holds in areas with strong demographic growth, not as cashflow investments.
Serviced Apartments and Strata-Titled Hotel Rooms
Serviced apartments and strata-titled hotel rooms are not treated as residential property by most mainstream lenders. These properties are managed by an operator, and your rental income depends on the performance of the hotel or serviced apartment business. Lenders view them as commercial or quasi-commercial investments, and most will decline the application unless you apply through a specialist lender.
If the property is located in a building with a hotel license, or if the strata plan includes restrictions on owner occupation, expect limited loan options, higher rates, and a maximum loan to value ratio of 60 to 70 per cent. These properties rarely suit investors building wealth through property unless you have significant equity and are prepared to hold for the long term.
New Builds Versus Established Properties
From 1 July 2027, negative gearing on established residential properties will be limited to losses incurred before that date. Properties purchased after 12 May 2026 will have their losses quarantined unless the property is a new build. A new build is defined as a property that adds to housing stock and has not been previously sold, or was sold by the builder and occupied for less than 12 months.
This distinction changes the economics of property investment. A new build in Charlestown allows you to continue claiming rental losses against your other income, while an established property does not. The trade-off is that new builds typically have lower capital growth in the first five to ten years, and the purchase price often includes a developer margin.
If you are purchasing an investment property now and plan to hold it through the transition period, the tax treatment of losses should be factored into your decision alongside rental yield, location, and capital growth potential. Do not assume that negative gearing alone justifies a purchase. The property must still perform as an investment without the tax benefit.
Properties with Commercial or Mixed Use
Properties with a commercial tenancy on the ground floor and residential above, or properties zoned for mixed use, require a different loan structure. Most lenders will treat the entire property as commercial if more than 50 per cent of the floor area is non-residential. That means a commercial loan with a higher interest rate, shorter loan term, and full principal and interest repayments from day one.
If the residential portion is on a separate title, you may be able to finance it with a standard investment loan and use a commercial property loan for the remainder. The rental income from the commercial tenancy is assessed differently, and vacancy risk is higher.
Mixed-use properties work well for experienced investors with multiple properties and strong cashflow. They rarely suit first-time investors or buyers relying on rental income to service the loan.
Knowing how lenders treat each property type before you make an offer keeps your portfolio flexible and your borrowing capacity intact. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Do lenders treat investment units and houses differently?
Yes. Most lenders treat units and houses on standard residential lots as standard security, but units in buildings with high tenant ratios or fewer than six units may face stricter conditions. Houses typically have lower rental yields but attract fewer lender restrictions.
Can I use negative gearing on an established investment property purchased now?
Properties purchased after 12 May 2026 will have rental losses quarantined from 1 July 2027 unless the property is a new build. Losses can still be offset against future rental income or capital gains. Properties held before 12 May 2026 retain existing negative gearing treatment until sold.
What loan to value ratio can I get on a property on acreage near Charlestown?
Properties on lots larger than 2.5 hectares are often classified as rural by lenders, with loan to value ratios capped at 70 to 80 per cent. Rental income is assessed at 70 per cent instead of 80 per cent, and some lenders apply higher interest rates.
Are serviced apartments treated the same as residential investment properties?
No. Serviced apartments and strata-titled hotel rooms are treated as commercial or quasi-commercial investments by most lenders. Loan options are limited, interest rates are higher, and maximum loan to value ratios are typically 60 to 70 per cent.
Do townhouses require a lower deposit than units in Charlestown?
Not usually. Townhouses on standard title are treated the same as houses, but those in community title schemes with shared facilities may have loan to value ratios capped at 80 per cent by some lenders.
