What are the Different Investment Property Types?

When you apply for an investment loan, lenders assess the property type before they assess you.

A unit, a house on a standard lot, and a townhouse backing onto a park might all sit in the same suburb at similar asking prices, but your borrowing power, the rate you'll pay, and the rental income a lender will accept can shift meaningfully between them. Lenders treat investment property types differently because they carry different risks, and those differences filter through to your application before you ever see a contract.

Houses on Standard Residential Lots

A house on a standard residential lot is the property type lenders prefer. Lenders accept rental income from these properties at 80 per cent of the expected amount, which means if a property rents for $500 per week, your broker can include $400 per week in your serviceability calculation.

Purchasing a house on a 450-square-metre lot in a Perth suburb such as Canning Vale or Baldivis usually means your loan will pass through credit assessment without requiring extra scrutiny. The property is fungible, it appeals to owner-occupiers as well as renters, and there's no body corporate or shared title complicating resale. Lenders see these properties as lower risk, and in turn, they lend at competitive rates without restricting your borrowing capacity beyond the standard buffers.

Units, townhouses and properties on strata title need closer attention. That's where loan structure starts to matter.

Units and Apartments in Strata Developments

Units and apartments on strata title attract different lending conditions. Some lenders will still lend at 80 per cent LVR, but many reduce their maximum to 70 per cent where the development includes more than six storeys, or where the unit sits in a building with known defects or a high percentage of short-term rental use.

Rental income on units is still assessed at 80 per cent of the expected amount, but lenders will look at the body corporate records, the sinking fund balance, any current or pending special levies, and the percentage of owner-occupiers versus investors in the building. If more than 50 per cent of lots are tenanted, some lenders classify the development as non-standard and either decline the application or apply an interest rate loading.

Consider a buyer looking at a two-bedroom unit in a complex near Perth CBD. The unit is listed with an expected rental income of $480 per week. The buyer's broker requests strata records and discovers the sinking fund balance is low and a special levy for roof repairs is due within 12 months. The lender reduces the accepted rental income by a further 10 per cent and applies a rate loading of 0.25 per cent. The buyer's borrowing power falls by around $30,000, and they need to either renegotiate the purchase price or find a lender with different strata criteria.

If you're looking at a unit as your first investment, ask your broker to request strata records early. Waiting until after you've made an offer can mean discovering your loan won't settle on the terms you expected.

Townhouses and Duplexes

Townhouses and duplexes occupy the middle ground. Where the property sits on its own strata lot with separate title, lenders generally treat it the same as a house on standard residential land. Where the townhouse shares common property, such as a driveway or garden, body corporate arrangements apply and lenders will review the strata documents in the same way they do for units.

Rental income assessment remains at 80 per cent of the expected amount, provided there are no adverse strata conditions. The difference usually appears in the LVR cap. Most lenders will lend up to 90 per cent on a townhouse with separate title, but only 80 per cent where the title is part of a larger strata scheme with shared facilities or common walls.

Perth suburbs such as Byford and Ellenbrook include estates with hundreds of townhouses. These properties rent consistently, and lenders know the area, but you still need to confirm whether your chosen townhouse sits on standard or strata title before you sign a contract. The title type determines your deposit requirement and whether you'll need to pay LMI.

Properties on Large or Irregular Lots

Properties on lots larger than one hectare, or on battle-axe blocks with long shared driveways, require additional lender approval. Most lenders will still provide investment loans for these properties, but they may reduce the maximum LVR to 70 or 75 per cent, or apply a rate loading where the block size or access creates resale risk.

Rental income is still assessed at 80 per cent, but lenders will often request a full valuation rather than relying on an automated valuation model. The valuer will consider whether the property's features limit the pool of potential buyers, and whether rental demand is strong enough to cover holding costs during a vacancy.

If you're considering a property on a larger block as an investment, speak to your broker about which lenders will accept it before you attend the first inspection. Some lenders won't touch properties over 2,500 square metres in metropolitan Perth, regardless of the rental return.

Properties with Commercial Zoning or Mixed Use

Properties zoned for commercial use, or for mixed residential and commercial use, are usually excluded from standard residential investment loan products. These properties require a commercial loan, which attracts a higher interest rate, a shorter loan term (often capped at 15 years), and principal and interest repayments from day one.

Rental income on commercial properties is assessed differently. Lenders will request a copy of the lease, and they'll only accept rental income where a lease is in place with a tenant who has been trading for at least 12 months. Expected or projected rent doesn't count.

If you're looking at a property with a shopfront on the ground floor and a residence above, check the zoning and the loan product before you commit. The rate difference between a residential and a commercial loan can be 1.5 to 2.0 percentage points, and that can make the investment unviable unless the rental return is significantly higher than a standard residential property.

How Property Type Affects Your Borrowing Power

Your borrowing power for an investment property depends on how much rental income the lender will accept, and that depends on the property type. A house that rents for $500 per week gives you $400 per week in assessed income. A unit that rents for $500 per week in a building with strata issues might give you $360 per week after lender adjustments. That $40 difference per week reduces your borrowing power by around $40,000 over a 30-year loan term, depending on your deposit and interest rate.

Property type also affects the rate you'll pay. Most lenders offer their lowest advertised investor rates on houses and townhouses with separate title. Units in developments over six storeys, or in buildings with high investor concentration, attract a rate loading of 0.10 to 0.50 percentage points. That loading applies for the life of the loan unless you refinance your investment loan to a different lender with better criteria.

When you're comparing properties, compare them on the loan terms they'll actually attract, not just the purchase price and rental yield. A unit with a 5.5 per cent gross yield might deliver less net income than a house with a 4.8 per cent yield once you account for body corporate fees, rate loadings and reduced borrowing capacity.

Choosing the Property Type That Suits Your Investment Strategy

The property type you choose should align with your investment strategy, your deposit size, and your appetite for involvement. Houses on standard lots are lower maintenance, attract consistent rental demand, and give you the most flexibility when it's time to sell or refinance. Units and townhouses can offer higher rental yields in inner suburbs, but they come with body corporate fees, strata restrictions, and lender limitations that reduce your net return.

If you're buying your first investment property, start with a property type that lenders treat as standard. That keeps your borrowing costs low, your loan options wide, and your exit strategy flexible. Once you understand how property type affects lending, rental income and resale, you can consider higher-yield properties with more complex structures.

Call one of our team or book an appointment at a time that works for you. We'll walk through the property types you're considering, show you how each one will be assessed by lenders, and structure your loan to give you the clearest path to approval and the lowest rate available for that property type.

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