Things to consider.

Borrowing to invest

You could use part of the equity in your home to borrow and then buy an investment property.

Depending on what's happened in the property market, you might be surprised by how much equity you've built up in your home.

What is equity?

Your equity is based on the difference between what your property is worth now and the size of your home loan.

You could then use this equity to get a loan on your investment property. Just note that any new lending will still need to meet the Loan-to-Value Ratio (LVR) restrictions and Westpac's home loan lending criteria.

Investment returns

There are two types of returns to consider when choosing an investment property - capital gain and yield from rental income.

1. Capital gains

Capital gains are earned when you sell a property for more than what you paid for it. Rules around the potential taxation of capital gains can be complicatedThe bright-line test for residential property may also apply if you sell a property you have owned for less than 5 years. We recommend you always speak to your tax adviser when you buy or sell an investment property.

2. Yield from rental income

A key consideration is calculating what you could earn from renting out your property. Do this by looking on property websites to see what similar properties are rented for. You could also ask a rental agency to do an appraisal for you. A property for sale will often already have an appraisal prepared by its agent, however it might be worth getting an appraisal done by an impartial agency.

You could increase your yield by finding a property where minor, low-cost improvements may allow you to recover a higher rent. Improvements such as painting it or adding a bedroom, carport, deck or an outdoor living area could make it more appealing to tenants.

Expenses to consider

Ongoing expenses

Purchase and set-up expenses

Interest costs on your loan.

Lawyers fees.

Property management (if you choose not to manage the property yourself) - generally ranging from 8-10% of the rental income.

Accountant or tax adviser fees.

Rental property insurance that covers the extra risks of owning a rental.

 LIM report.

Insurance for you - such as life and income protection insurance, depending on your personal situation.

Building inspection report. 

Repairs and maintenance.

 Engineer's report.

Council rates.

 Valuation fee.

Body corporate expenses, if applicable.

Your share of rates pre-paid by current owners. 

Ground rent, if your property is leasehold.

 Purchase of whiteware, if you're planning on supplying this.

Ongoing professional service fees (accountant, tax adviser etc.).

 Any initial repairs or upgrades you want to do

Cleaning between tenants.

 Any time where the property is untenanted.

Gardening and lawns.


Travel costs to your property.


Water bills.


Vacant properties

While a vacant property isn't a direct expense, keeping tenants can sometimes be challenging. It's worthwhile budgeting to allow for a loss in rental income from having a vacant property every year.


Owning a residential investment property has tax implications, income generated from rent is taxable, which means that you'll need to complete a tax return each year. Gains from the sale of a property may also be taxed. Tax rules often change and can be complex, so it's essential to get regular guidance on your personal circumstances from an independent tax adviser or accountant. You can also find a tax guide on rental income on the IRD website.

If your property is negatively geared  under the ring-fencing rules any tax loss you suffer will generally need to be carried forward and deducted from taxable rental income in later tax yearsYou will not be able to offset any rental losses against other income you have in the same tax year, except in certain situations.

We strongly advise that you always speak with an independent tax adviser before you invest in residential property.


When you borrow money to invest in residential property, loan repayments and other expenses can be higher than your rental income. In this situation you are negatively geared. Because of this, you may have rental tax losses, which will generally need to be carried forward to later tax years.

If your rental income is higher than your expenses, then you are positively geared. Rent is an income source, and therefore it's taxable.

There are benefits to both scenarios, but your individual circumstances and the property you're looking to purchase will dictate which is the best investment strategy. Make sure you consult an independent tax adviser, accountant or financial planner to understand all the specific tax considerations for your situation before you start investing in residential property.


Find the best option for you with our home loan calculators.

Get in touch.

Meet with an expert

Our Mobile Mortgage Managers can come to you, when it suits you best.

Find a Mobile Mortgage Manager

Talk to us

Call us any time from 8am - 6pm weekdays, 9am - 3pm Saturday.

Call 0800 177 277

Visit us

Make an appointment to talk to a home loan expert in branch.

Find your nearest branch

Things you should know.

1 Conditional approval requires a credit check and confirmation of the details provided in your application. Other conditions may also apply depending on the nature of your application.

The material on this webpage is provided for information purposes only and is not a recommendation or opinion in relation to property investments or home loans. The information on this webpage does not take your particular financial situation or goals into account

Westpac's home loan lending criteria and terms and conditions apply. An establishment charge may apply. A low equity margin may apply. An additional fee or higher interest rate may apply to home loans if the application is accepted but does not meet the standard lending criteria.