Maximising Your Investment Property: How to Boost Borrowing Power, Reduce Tax, and Build Wealth

By Ramesh Kandel – Mortgage Broker & Director, Rayz Financial Services

When it comes to property investment in Australia, success is about more than just choosing the right property — it’s about understanding how to structure your finance, leverage rental income, and use available tax benefits to your advantage.

At Rayz Financial Services, I help investors nationwide — from first-time buyers to seasoned professionals — create finance strategies that help them purchase sooner, reduce tax, and improve cash flow while staying compliant with Australian tax and lending rules.

1. Maximise Borrowing on Investment Loans

In Australia, interest on investment property loans is generally tax-deductible when the property is rented or genuinely available for rent. By contrast, interest on an owner-occupied home loan is not deductible.

That’s why many investors:

• Maximise their borrowing for investment properties, allowing more interest to be claimed as a tax deduction.
• Focus on reducing their owner-occupied home loan as quickly as possible, as that debt is non-deductible.

This strategy keeps personal debt low and investment debt working for you — helping you grow your portfolio faster.

2. Use Rental Income to Increase Borrowing Capacity

Most lenders in Australia include 70–80% of your gross rental income in their serviceability calculations to allow for costs like property management fees, maintenance, and vacancy periods.

However, some investment-focused lenders can use up to 90% of your rental income, especially when:

• The property is in a high-demand area with low vacancy rates.
• It’s a new or near-new property with low expected maintenance.
• The borrower has strong financials and a good credit profile.

Example: If your investment earns $600/week:

• At 80% inclusion, the lender uses $480/week towards your income.
• At 90% inclusion, the lender uses $540/week — potentially boosting borrowing power by $50,000–$70,000 or more.

3. Claim Depreciation to Reduce Tax

Depreciation allows investors to claim the decline in value of certain property assets as a tax deduction under Australian Taxation Office (ATO) rules.

There are two main categories:

• Division 40 – Plant & Equipment: Items like carpets, blinds, ovens, hot water systems.
• Division 43 – Capital Works: Structural elements like walls, roofing, and floors, generally claimed at 2.5% per year for up to 40 years.

Note: Since 1 July 2017, second-hand plant & equipment in residential properties can’t be depreciated, but capital works and brand-new items you install can still be claimed.

A qualified quantity surveyor can prepare an ATO-compliant depreciation schedule, often unlocking thousands of dollars in deductions every year.

4. Negative Gearing in Australia

If your investment property’s expenses (loan interest, rates, insurance, maintenance, depreciation) exceed its rental income, the loss can usually be offset against your taxable income.

You can claim this:

• Annually when lodging your tax return.
• Throughout the year via a PAYG Withholding Variation, which reduces the tax withheld from your salary to boost cash flow immediately.

5. Medico Professionals: Low-Deposit, No-LMI Investment Loans

If you’re a nurse, doctor, dentist, pharmacist, or other eligible medical professional, you may qualify for specialised medico lending packages that make building a property portfolio easier:

• Borrow up to 90–95% LVR with no Lenders Mortgage Insurance (LMI) — saving tens of thousands upfront.
• Access competitive interest rates and flexible loan features.
• Use these benefits for owner-occupied or investment properties.

Example: On a $900,000 investment property, avoiding LMI at 90% LVR could save you $20,000–$25,000, which can be used for renovations or your next deposit.

6. Add Value to Increase Rent & Equity

In Australia’s competitive rental market, strategic improvements can increase both rental income and capital value:

• Install split-system air-conditioning (can add $20–$40/week rent).
• Renovate kitchens and bathrooms for higher yields.
• Add solar panels or energy-efficient features to attract quality tenants.
• Apply cosmetic upgrades such as fresh paint, lighting, and flooring.

Client Success Story – Medico Couple Builds a Portfolio Fast

A Canberra-based nurse and her GP husband wanted to start investing but had limited savings.

Here’s how we made it happen:

1. Used a medico lending package to buy a $750,000 investment property at 90% LVR with no LMI, saving over $18,000 upfront.
2. Chose a lender that included 90% of the $550/week rental income in serviceability calculations.
3. Ordered a depreciation schedule, adding $5,800 in deductions in the first year.
4. Applied a PAYG Withholding Variation to boost monthly cash flow.

Within three years, they purchased a second investment property — a step they thought would take a decade.

The Rayz Financial Services Advantage

I help you:

• Access lenders that use up to 90% rental income in calculations.
• Structure loans for maximum deductible debt and tax efficiency.
• Secure low-deposit, no-LMI investment loans for eligible medico professionals.
• Work with your accountant for a tax-smart approach.
• Plan a step-by-step portfolio growth strategy.

Final Word

With the right strategy — especially if you qualify for no-LMI medico lending benefits — you can:

• Enter the market sooner with less deposit.
• Boost borrowing power using rental income.
• Reduce tax liability through legitimate deductions.
• Build a sustainable property portfolio faster.

📞 Contact Ramesh Kandel
Mortgage Broker & Director – Rayz Financial Services
📧 ramesh@rayz.com.au | 📱 0451 065 166

Disclaimer: This information is general in nature and does not constitute tax advice. Please seek advice from a qualified tax accountant or financial adviser.