How to Structure Investment Property Loans for Maximum Growth

I own five properties across NSW and Victoria. I've made mistakes with loan structure early on that cost me borrowing capacity down the track. I've also done things right that gave me the flexibility to keep buying when others hit a wall. This is what I've learned, and what I apply when helping investor clients structure their lending.

Cross-collateralising your loans.

Cross-collateralisation means using one property as security for another loan. Banks often suggest this because it's convenient for them. It's rarely good for you.

When your properties are cross-collateralised, the bank controls more of your portfolio. If you want to sell one property, release equity, or switch lenders, you need the bank's cooperation on everything at once. Your negotiating position weakens significantly.

The better approach: keep each property as standalone security for its own loan wherever possible. This gives you flexibility to sell, refinance, or access equity on each property independently.

For investment properties, interest-only (IO) loans are often the right structure, at least in the early years of the investment.

Here's why. Your investment loan interest is tax-deductible. Your owner-occupied home loan interest is not. By paying interest-only on your investment property, you maximise the deductible debt and direct your principal repayments towards your non-deductible home loan instead. This is a strategy called debt recycling and it can meaningfully improve your after-tax position.

That said, IO periods have limits (typically five years, sometimes up to ten) and your payments increase when you roll onto principal and interest. Your serviceability needs to account for this. I always stress-test clients against the P&I repayment, not just the IO rate.

Serviceability is how lenders assess whether you can afford your repayments. Every loan you take reduces your serviceability for the next one. Poor structure accelerates this erosion.

Key principles for preserving borrowing capacity:

Use the right lenders in the right order. Different lenders have different serviceability calculators. Some are significantly more generous than others, particularly for existing property income. Matching the right lender to each purchase can add hundreds of thousands of dollars to your capacity over a portfolio.

Keep loan limits lean. Applying for a larger limit than you need ties up serviceability unnecessarily. If you need $500k, borrow $500k, not $600k "just in case."

Separate investment and owner-occupied debt clearly. Mixing them in offset accounts or redraw facilities creates accounting headaches and potential ATO complications. Keep them clean from day one.

Be strategic about which entity borrows. Whether you buy in your personal name, a trust, or a company structure has tax and borrowing implications. This is worth discussing with your accountant alongside your broker.

An offset account on your investment loan is a mixed bag. Any money sitting in an offset against an investment loan reduces the interest and therefore the deductible amount. If you have surplus cash, it may be better directed towards your home loan offset instead.

The optimal structure for most investors with a home loan and an investment property: offset account attached to the home loan, with the investment loan running on interest-only with no offset. This maximises tax-deductible interest while reducing non-deductible debt.

At the start, before each new purchase, when your IO period is expiring, and whenever your circumstances change significantly. A loan structure review with a broker costs nothing and can uncover significant savings or capacity improvements.

If you're already two or three properties in and haven't done a structure review recently, there's a reasonable chance your setup isn't optimised. Book a chat and we'll take a look.