The property type you choose determines which lenders will support your application, at what rate and under what conditions.
Glen Iris sits across two markets. The northern end toward the Monash Freeway and Gardiners Creek Reserve attracts owner-occupiers chasing renovation projects and established homes near Ashburton Village. The southern and eastern pockets, closer to High Street and the train line, hold a concentration of older apartment stock and newer townhouse developments. Both markets see investor activity, but the borrowing terms differ sharply depending on whether you're acquiring a house, a unit in a block of eight, or a newer townhouse in a boutique development.
Houses on Established Land
A standalone house on a standard title gives you the widest lender panel and the lowest investment interest rate.
Lenders assign the lowest risk weight to this property type. You will typically access headline investor rates and higher loan-to-value ratios without lender-imposed restrictions. If you are purchasing a detached dwelling near Burke Road or the Glen Iris precinct around the Gardiner station, most mainstream lenders will offer 90 per cent finance subject to Lenders Mortgage Insurance, with interest-only terms available for five years and the option to split between variable and fixed rate portions. Rental income is assessed at 80 per cent of market rent in most serviceability models, and vacancy assumptions sit around 4 to 5 per cent annually.
Consider a buyer acquiring a weatherboard house requiring cosmetic renovation near the reserve. The property is tenanted at market rent, and the borrower holds equity in an owner-occupied property elsewhere. A lender will capitalise rental income conservatively but will not apply additional serviceability overlays. At an 80 per cent loan-to-value ratio, Lenders Mortgage Insurance may be waived entirely if the borrower's debt-to-income position sits below the threshold, and full interest-only terms are available without additional justification.
Units and Apartments
Units in larger apartment blocks trigger tighter lending policy, particularly when the block exceeds 50 dwellings or contains commercial tenancies.
Lenders differentiate between boutique blocks and high-density developments. A two-bedroom apartment in a block of six along Malvern Road will usually attract standard pricing and standard loan-to-value limits. A similar apartment in a building of 80 dwellings may face a reduced maximum loan-to-value ratio of 80 per cent, higher interest rate loadings of 10 to 25 basis points, and certain lenders may decline the application outright based on internal exposure limits to that postcode or building.
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Serviceability is also affected by body corporate fees, which reduce net rental income and can materially affect borrowing capacity on apartments with quarterly levies above $1,500. Lenders deduct the annual body corporate cost from gross rental income before applying the 80 per cent income factor, so a property generating $32,000 in annual rent with $6,000 in body corporate fees is assessed on rental income of approximately $20,800 after deductions and the income factor.
If the apartment building includes short-term rental use or serviced apartment agreements, most mainstream lenders will not offer finance regardless of loan-to-value ratio. A small number of non-bank lenders will consider these properties but at materially higher rates and with principal-and-interest repayment structures mandated from settlement.
Townhouses and Villas on Strata Title
Townhouses on strata or community title occupy a middle position between houses and apartments in terms of lending appetite.
A two-storey townhouse in a development of four typically receives the same pricing and loan-to-value treatment as a detached house, provided the development was completed within the last 15 years and body corporate fees remain modest. Lenders view these properties as lower density with fewer common-area liabilities. If the development sits on a community title with shared driveways and minimal common property, most lenders treat the security as equivalent to standard residential.
Developments exceeding 20 townhouses on a single title, or those with shared recreational facilities such as pools and gyms, may attract the same overlays applied to apartment blocks. Borrowers should confirm lending appetite before contracting, particularly for newer high-density townhouse estates near the Waverley Road corridor where recent subdivisions have created larger strata schemes.
New Build Dwellings Acquired from a Developer
A property classified as a newly erected dwelling under the tax legislation offers access to unrestricted negative gearing beyond 1 July 2027, but lender appetite varies considerably.
The property must be constructed on previously vacant land, or must replace an existing dwelling while increasing the total number of dwellings on the site. A new townhouse built as part of a subdivision that converted a single block into three dwellings meets the definition. A knock-down rebuild that replaces one house with one new house does not.
Lenders apply completion risk, presale exposure and valuation methodology differently depending on whether the property is purchased off the plan or on practical completion. If you purchase off the plan with a 10 per cent deposit and settle in 18 months, the lender will revalue the property at settlement and will only advance funds based on the lower of contract price or settled valuation. In a flat or declining market, this can create a funding shortfall that requires additional cash at settlement. Most lenders will also require at least 50 per cent of units in the development to be presold or settled before offering finance on an individual apartment.
Off-the-plan apartments in developments above 50 dwellings face the compounding effect of apartment lending overlays and construction-phase valuation risk. Borrowers targeting the new build tax treatment should weigh the negative gearing and capital gains benefits against the higher deposit requirement and narrower lender panel. For properties settling after 1 July 2027, a newly constructed townhouse or villa in a small development may deliver more certain finance approval than an apartment in a larger block, even where both qualify as new builds under the tax rules.
How Property Type Affects Portfolio Growth
Acquiring a second or third investment property depends as much on the property type you already hold as the one you intend to purchase.
If your first investment is a house on standard title with a loan-to-value ratio below 80 per cent, you retain the ability to access equity and add a second property without selling. If your first investment is an apartment in a block of 60 dwellings at 90 per cent loan-to-value with Lenders Mortgage Insurance, most lenders will limit further investment borrowing until that loan-to-value ratio falls below 80 per cent through either principal repayment or capital growth. The debt-to-income settings introduced in February mean that each additional property must fit within the overall income multiple, and higher-risk property types reduce the headroom available for subsequent purchases.
When planning a portfolio around Glen Iris, the local mix of detached homes, older walk-up units and newer medium-density developments allows a staged approach. A borrower might acquire a house near the Gardiner station as a first investment to preserve borrowing capacity, then add a townhouse or villa in a smaller strata scheme once equity has accumulated, rather than leading with an apartment that constrains future growth.
Selecting the Right Loan Structure for Each Property Type
Interest-only terms, offset accounts and rate type all interact with property type and investment strategy.
Most lenders offer five-year interest-only terms on houses and low-density townhouses without additional justification. Apartments and higher-density developments may face a reduced interest-only period of three years, or may require the loan to revert to principal and interest within 12 months. Offset accounts are available on variable rate investment loans, but not on fixed rate portions, so splitting the loan between fixed and variable allows you to park surplus funds in offset against the variable portion while locking rate certainty on the remainder.
If you intend to pay down the loan using rental income or salary, a principal-and-interest structure from the outset reduces total interest cost over the life of the loan. If you intend to recycle equity into further property purchases, interest-only maximises cash flow and preserves capital for redeployment. The strategy should align with the property type: a high-yielding villa in an area with modest capital growth expectations may suit principal and interest to build equity, while a house in a tightly held pocket with strong long-term growth prospects and lower yield may suit interest-only to retain funds for the next acquisition.
Taxation and Legislative Changes Affecting Property Type Selection
From 1 July 2027, only newly constructed dwellings that increase housing supply will allow full negative gearing for new purchasers.
This does not affect properties you already own or properties you contract to purchase before the announcement date in May. For properties acquired after that date, a renovated house, an established apartment, or a knock-down rebuild that does not increase the dwelling count will have rental losses quarantined. Those losses can offset future rental income or future capital gains from residential property, but cannot reduce salary or other income in the year the loss is incurred.
The change alters the economics of acquiring certain property types. A negatively geared house purchased in August 2027 will no longer deliver an annual tax refund, but will still build equity and generate franking credit value if held in conjunction with dividend income from other investments. The rental loss is not lost, but its value is deferred. Buyers who previously targeted high-deduction properties with the intention of offsetting salary income will need to reconsider whether the deferred benefit justifies the holding cost, or whether a positively geared property or new build better fits their circumstances.
The capital gains changes apply only to gains accruing after 1 July 2027, so a property purchased in early 2027 and sold in late 2029 will have the gain apportioned. The portion of gain up to 30 June 2027 receives the 50 per cent discount, and the portion after that date is taxed under the new indexed cost base and minimum rate rules. Property types with strong long-term capital growth prospects, such as detached houses in tightly held Glen Iris pockets, may still deliver better after-tax returns than higher-yielding apartments even under the revised tax treatment, but the margin narrows.
Working with a Broker to Match Property Type and Loan Product
Different lenders have different appetites for the same property type, and that appetite shifts over time as portfolios and prudential settings change.
A lender that offered 90 per cent loan-to-value finance on apartments in a particular postcode 18 months ago may now cap exposure at 80 per cent or may have paused new applications entirely for that building. A broker with access to multiple lender panels can identify which institutions are actively writing investment loans on the property type you are targeting, and can structure the application to fit their current criteria. This is particularly relevant in Glen Iris, where the suburb spans two council areas and contains a wide mix of housing stock that does not fall neatly into a single risk category.
If you are comparing a house, a townhouse and an apartment in the same price range, a broker can model the borrowing capacity, interest rate and loan features available for each, then show you the difference in serviceability, cash flow and future equity access. That comparison should inform your purchase decision alongside the property fundamentals, rather than being considered only after you have signed a contract.
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Frequently Asked Questions
Do apartments in larger buildings attract different investment loan terms than houses?
Yes, apartments in buildings exceeding 50 dwellings typically face reduced maximum loan-to-value ratios of 80 per cent, interest rate loadings of 10 to 25 basis points, and some lenders may decline the application based on internal exposure limits. Houses on standard title generally receive the widest lender panel and lowest rates.
Can I still negatively gear an established investment property purchased after July 2027?
Rental losses on established residential dwellings purchased after 12 May 2026 will be quarantined from 1 July 2027 and can only offset future rental income or future residential property capital gains. Losses cannot reduce salary or other non-residential income. Properties held before that date and newly constructed dwellings that increase housing supply remain eligible for unrestricted negative gearing.
How do body corporate fees affect borrowing capacity on a unit?
Lenders deduct annual body corporate fees from gross rental income before applying the 80 per cent income factor used in serviceability. A property with high quarterly levies will show lower net rental income, which reduces the amount you can borrow compared to a house with the same rent but no body corporate cost.
Will a lender finance an off-the-plan apartment at 90 per cent loan-to-value?
Most lenders require at least 50 per cent of units in a development to be presold or settled before offering finance, and they revalue the property at settlement based on the lower of contract price or settled valuation. Off-the-plan apartments in buildings above 50 dwellings often face reduced loan-to-value limits and may require a higher deposit than established property.
Does property type affect my ability to buy a second investment property?
Yes, lenders assess your existing portfolio when considering additional borrowing. A house at 80 per cent loan-to-value allows easier equity access and further lending than an apartment at 90 per cent loan-to-value in a high-density building. Debt-to-income caps also mean higher-risk property types reduce headroom for subsequent purchases.
