Smart ways to build a multi-property portfolio

Building a portfolio of investment properties sounds like something reserved for career investors, but it's actually more accessible than most people assume.

The reality is that lenders will work with you to acquire several properties over time, provided you understand how they assess each new loan application. In Randwick, where property values have remained steady and rental demand is driven by proximity to the University of New South Wales, multiple coastal beaches, and the Prince of Wales Hospital precinct, buying more than one property can make sense for those looking to build wealth through property.

The difference between buying your first investment property and your third is less about available loan products and more about how lenders calculate your borrowing capacity as your portfolio grows.

How lenders assess additional investment property loans

Every time you apply for a new investment loan, lenders look at your existing debts, your income, and the rental income from properties you already own.

Rental income is typically assessed at 80% of the actual rent received, which accounts for vacancy rates and maintenance costs. If you own a unit in Randwick that rents for $700 per week, lenders will generally use $560 per week in their calculations. This is sometimes called a 'shading rate' and it reduces how much borrowing capacity that rental income gives you.

Consider someone who owns a two-bedroom apartment near Coogee Beach, purchased two years ago. The rent is $750 per week, but the lender assesses it at $600. They want to acquire a second property in Maroubra. The lender will factor in the existing loan repayment, assess the reduced rental figure, and then determine how much additional borrowing the applicant can service. If their salary is $110,000 and their first property loan sits at $650,000, they might still have capacity to borrow another $500,000, depending on interest rate buffers and other commitments.

This assessment changes with each property you add, which is why understanding borrowing capacity becomes more important as your portfolio expands.

Interest only repayments and cash flow in a growing portfolio

Interest only investment loans allow you to pay only the interest portion of the loan for a set period, usually between one and five years.

This keeps repayments lower during the interest only period, which can improve your cash flow and allow you to hold multiple properties without the immediate pressure of higher principal and interest repayments. For property investors looking to acquire several properties in a relatively short timeframe, this structure can provide breathing room while rental income builds and property values increase.

In a scenario where you own three investment properties across the Eastern Suburbs, each with interest only loans, your monthly repayments might be $8,500 instead of $12,000 on principal and interest. That $3,500 difference can be redirected toward deposit savings for a fourth property, or held as a buffer for unexpected repairs or vacancy periods. Once your portfolio stabilises and rental income is covering costs comfortably, you can switch loans to principal and interest to start reducing debt.

The trade-off is that you're not paying down the loan balance during the interest only period, so you're not building equity through repayments. You're relying on property value growth and rental income to build your position, which works well in areas with consistent demand like Randwick, but requires careful planning.

Using equity to fund subsequent property deposits

Equity is the difference between what your property is worth and what you owe on it.

As property values rise and you pay down your loan, that equity grows. You can access it through an equity release loan to fund deposits on additional properties without needing to save the full amount in cash. This is one of the most common ways investors acquire multiple properties over time.

Suppose you purchased an older-style unit in Randwick three years ago for $850,000 with a 20% deposit. The loan was $680,000. Today, the property is valued at $950,000, and you've paid the loan down to $640,000. That gives you $310,000 in equity. Lenders will typically allow you to borrow up to 80% of the property's value, which is $760,000. You already owe $640,000, so you could access up to $120,000 in usable equity. That's enough for a 20% deposit on a $600,000 property, plus costs.

This approach allows you to keep building without waiting years to save another deposit. However, it does increase your overall debt, and lenders will reassess your borrowing capacity with the new loan amounts in mind. If rental income from both properties and your salary can service the combined debt, the application will generally proceed.

You'll also need to consider Lenders Mortgage Insurance (LMI) if borrowing above 80% loan to value ratio on any individual property. Some lenders offer investment loan refinance options that can consolidate equity releases and improve loan structures as your portfolio matures.

Tax benefits that support portfolio growth

Investment properties come with several tax deductions that reduce the cost of holding multiple properties.

Loan interest, property management fees, council rates, strata fees for units, depreciation on fixtures and building value, repairs and maintenance, and landlord insurance are all claimable expenses. If your total deductions exceed your rental income, the loss can be offset against your other taxable income, which is referred to as negative gearing benefits.

In Randwick, where many investment properties are apartments with body corporate fees that can run $1,500 to $3,000 per quarter, these costs add up but are fully deductible. If you own two properties and each generates a $10,000 annual loss after accounting for rent received and all expenses, that's $20,000 in deductions that reduce your taxable income. For someone earning $120,000, that can translate to several thousand dollars in tax savings each year, which improves cash flow and makes holding multiple properties more sustainable.

Stamp duty is another cost to factor in. In New South Wales, stamp duty on a $900,000 investment property is approximately $35,000. While this isn't deductible as an ongoing expense, understanding the upfront costs across multiple purchases helps you plan accurately and avoid surprises.

Maximising tax deductions requires keeping detailed records and working with an accountant who understands property investment, but the benefits are substantial when you're managing more than one loan.

How loan to value ratio affects your ability to expand

Loan to value ratio (LVR) is the percentage of the property's value that you're borrowing.

Lenders use LVR to assess risk. The lower your LVR, the less risky you are as a borrower, and the more likely you are to access additional loan products with favourable terms. When you're acquiring multiple properties, keeping your LVR at or below 80% on each property can avoid LMI and keep your options open for future borrowing.

If you're buying a property in Randwick valued at $1,000,000 and borrowing $800,000, your LVR is 80%. If the property increases in value to $1,100,000 over three years and you've paid the loan down to $760,000, your LVR drops to around 69%. That improved position gives you more equity to access and makes lenders more comfortable approving your next investment loan.

Maintaining strong LVRs across a portfolio requires balancing debt levels, property selection, and timing. Acquiring properties in locations with stable or growing values, like the beachside suburbs around Randwick, supports this approach because capital growth works in your favour even when you're not actively paying down large amounts of principal.

Structuring loans across multiple properties

How you structure each loan matters when you're managing several properties.

Some investors use separate loans for each property to maintain flexibility. This allows you to refinance one property without affecting the others, or to switch one loan from interest only to principal and interest while keeping others on an interest only structure. It also makes it easier to sell a property later without disrupting your overall loan arrangements.

Others consolidate loans under a single facility with multiple splits, which can simplify administration and sometimes access better interest rate discounts due to the larger total loan amount. The downside is less flexibility if you want to make changes to one property's loan without affecting the rest.

In our experience, most property investors building portfolios in the Eastern Suburbs benefit from keeping loans separate, particularly in the early stages when loan amounts and property values vary. As the portfolio matures and you're focused more on holding than acquiring, consolidation can make sense for administrative simplicity and potentially lower rates.

Call one of our team or book an appointment at a time that works for you. We'll walk you through how lenders assess multiple investment loan applications, help you understand your borrowing capacity as your portfolio grows, and structure loans that support your property investment strategy without unnecessary complexity.

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