The Easiest Way to Choose an Investment Property Type

Not all investment properties are treated the same by lenders. A two-bedroom unit in Lakes Entrance might deliver steady rental income with lower maintenance, while a house on acreage outside Bairnsdale could struggle to find tenants and require a larger deposit. The property type you choose determines your borrowing power, your interest rate, and whether some lenders will back you at all.

Lenders assess risk differently depending on what they're lending against. A serviceable property in a town centre gets better terms than a niche property in a limited market. Before you settle on a property type, you need to understand what your loan will look like once you apply.

Houses vs Units: What Lenders Actually Look At

A detached house on its own title is the lowest-risk property type for most lenders. You own the land, you control the maintenance, and resale demand is usually broad. Units and apartments carry additional considerations. Lenders will assess the building's structural condition, the body corporate financials, and the percentage of owner-occupiers versus investors in the complex. A block with high rental occupancy or outstanding building defects may trigger a reduced loan amount or a declined application.

Consider a buyer looking at a three-bedroom house in Bairnsdale compared to a two-bedroom apartment in a strata complex. The house might be priced higher, but the loan amount offered by the lender is likely to reflect the full valuation. The unit might come in under valuation if the lender identifies issues in the strata report or sees too many units in the complex already rented out. The outcome is that the buyer needs a bigger deposit for the unit, even though the purchase price is lower.

For units, lenders also look at the number of storeys, the age of the building, and the size of the complex. High-rise buildings over three storeys, or complexes with more than 50 units, can attract servicing overlays or valuation discounts. Some lenders won't lend on units under 50 square metres. If the complex has commercial tenancies on the ground floor, some lenders treat the loan as non-standard.

Townhouses and Villas: The Middle Ground

Townhouses and villas usually sit between houses and units in terms of lender appetite. They're on strata title, so body corporate rules and levies apply, but they often include a small courtyard or garage, which appeals to tenants and future buyers. Lenders treat them more like houses than apartments, provided the complex is small and well-maintained.

The key difference is land content. A villa with a reasonable land component and a low body corporate fee is often treated the same as a house. A townhouse in a dense development with high levies and limited private outdoor space might be assessed like a unit. When applying for an investment loan, the valuer's assessment of land content can shift the loan-to-value ratio by five or ten percentage points, which directly affects whether you need to pay Lenders Mortgage Insurance.

Rural and Lifestyle Properties: Where Lender Appetite Drops

Properties on larger blocks outside town centres, lifestyle properties, and anything over five acres are treated as higher risk by most mainstream lenders. Rental demand is narrower, resale timelines are longer, and property maintenance costs are less predictable. Some lenders won't lend at all on properties over two hectares, and others cap the loan-to-value ratio at 70 per cent, meaning you need a 30 per cent deposit even if you have strong income.

In our experience, buyers around Bairnsdale often look at small acreage properties thinking they'll hold value and attract tenants. The reality is that a four-bedroom house on five acres might sit vacant for months between tenants, and the lender knows that. If your borrowing capacity is tight, a rural property will reduce your loan amount further because lenders apply stricter serviceability buffers and may refuse to include projected rental income until you've had a tenant in place for six months.

If you're set on a lifestyle property as an investment, expect to provide a bigger deposit, accept a higher interest rate, and have a smaller pool of lenders willing to support the purchase. Some specialist lenders will go further, but their rates are usually higher and their loan features more limited. That's not a reason to avoid these properties, but it does mean your finance strategy needs to be set before you start looking.

Dual Occupancy and Granny Flats: Two Incomes, More Complications

A property with a second dwelling, whether it's a granny flat or a dual occupancy setup, generates two rental incomes. Lenders will usually include both income streams in their assessment, but only if each dwelling is separately tenanted and meets local council requirements. If the second dwelling is unapproved or doesn't comply with planning rules, the lender won't count the income and may reduce the valuation.

Consider a buyer purchasing a house in Bairnsdale with an approved self-contained flat at the rear. The buyer plans to rent both dwellings and use the combined income to service the loan. The lender will require evidence that the flat is approved, that it has separate metering, and that both dwellings can be leased independently. If the flat was built without a permit, the lender treats the property as a single dwelling, the projected rental income drops, and the loan amount may no longer be enough to settle the purchase.

If you're refinancing or looking at refinancing an existing investment property with a secondary dwelling, the same rules apply. Lenders want to see council compliance and separate lease agreements before they factor in the second income. Without that, you're borrowing against one dwelling, even if you're collecting two rents.

Apartments in Small Regional Towns: The Oversupply Risk

Bairnsdale and the surrounding region have seen some apartment development, but lending appetite for units in small regional centres is often lower than in metro areas. Lenders are cautious about oversupply, limited resale demand, and high vacancy rates. If the lender's valuer identifies more than a handful of comparable units on the market at the same time, they may discount the valuation or decline the loan altogether.

Units in small towns often appeal to investors because the entry price is lower, but the rental return needs to be strong enough to offset a higher interest rate and a reduced loan amount. If the projected rent is below the lender's serviceability threshold, your deposit requirement increases. In some cases, the lender will require evidence of a signed lease before they'll settle the loan, which adds timing risk if the property is vacant at purchase.

How Property Type Affects Your Interest Rate and Loan Features

Investment loans already attract a higher interest rate than owner-occupier loans, but the property type can push that rate higher again. A house in town on a standard residential block will usually access the lender's standard investor rate. A unit in a high-rise building, a property on acreage, or a house in a regional location with a declining population might attract a rate loading of 0.10 to 0.50 percentage points, depending on the lender.

Loan features also vary. Some lenders won't offer offset accounts on loans for units in buildings over six storeys, or for properties in certain postcodes. Others restrict interest-only periods to five years instead of ten if the property type is considered higher risk. If you're comparing loan options, the property type should be part of the conversation from the start, not something you mention after the lender has given you an indicative approval.

The reality is that two buyers with the same income and deposit can be offered different loan amounts and different rates depending purely on what they're buying. The investment property market around Lakes Entrance, Paynesville, and Bairnsdale is diverse, and lenders price that diversity into every loan.

What to Do Before You Commit to a Property Type

Before you make an offer, speak to a broker who can check how different lenders will treat the property type you're considering. A pre-approval based on a generic property description won't hold up if the actual property is a unit in a building with cladding issues, or a house on a large block that the lender classifies as rural. The property type needs to be part of your finance discussion from day one, not something you sort out after you've signed a contract.

If you're weighing up several property types, a broker can run scenarios for each one and show you the real deposit, the real rate, and the real loan amount you'll be offered. That lets you compare properties on a level footing, rather than discovering halfway through the purchase that your loan amount has dropped and you need to find another $20,000 in cash.

Call one of our team or book an appointment at a time that works for you. We work with buyers around Bairnsdale and across East Gippsland, and we'll tell you upfront how lenders will treat the property type you're looking at before you go any further.

Frequently Asked Questions